Key facts
- UK consumer confidence fell to a three-month low in September.
- The S&P Global consumer sentiment index decreased to 42.7 in September from 42.9 in August.
- Over 50% of 1,500 respondents anticipate an increase in borrowing costs within the next year.
- The average two-year fixed mortgage rate reached 5.88% on Monday, its highest since April 16.
- The average five-year fixed mortgage rate is at its highest since October 2023, at 5.92%.
- Average monthly mortgage direct debits have risen from £600 to £900 over the past four years.
Fears over rising mortgage payments and job insecurity have driven UK consumer confidence to a three-month low, according to S&P Global. The consumer sentiment index fell to 42.7 in September from 42.9 in August, signaling significant financial strain on households.
Consumers are worried about potential interest rate hikes by the Bank of England, with over 50% of respondents expecting borrowing costs to rise in the next year. Fixed-rate mortgage rates have already reached multi-year highs, with the average two-year fixed rate at 5.88% and the five-year fixed rate at 5.92%. These increases are projected to add approximately £150 to monthly payments on a typical £250,000 loan over 25 years. Official figures show average monthly mortgage direct debits have climbed from £600 to £900 over the last four years.
Maryam Baluch, an economist at S&P Global Market Intelligence, noted that improved sentiment towards the new government is being overshadowed by concerns about energy prices, the cost of living, and job prospects. She added that households are finding it harder to access credit, indicating that tighter monetary conditions are impacting borrowing. These factors contribute to caution about financial futures and pose risks to the economic outlook.
Despite a resilient jobs market recently, employers are showing concern about profitability. This is evidenced by a six-month decline in payroll employees and a five-year low in job vacancies. The British Chamber of Commerce has urged the government to provide additional support to businesses, citing recent tax increases. A survey by the organization found that only 17% of companies planned to increase investment in the coming months, a post-pandemic low.
In response to calls for tax cuts, Liberal Democrat leader Ed Davey proposed reducing fuel duty. Meanwhile, the German government announced a 15p cut in fuel tax effective October 1. Analysts suggest that any tax rises by Chancellor Healey, such as on capital gains, may not generate enough funds to cover increased defense spending and debt costs while maintaining a £20 billion reserve buffer.