New Reality Index Points To Slowed Spending
A new index looking at the realities of the financial constraints placed on UK consumers has predicted that spending will decrease in the coming months as people come to terms to the limitations imposed on them by a worsening economic climate.
One of the principal findings of the Alliance Trust Research Centre’s Financial Reality index is that a cooling in house price growth and lowered equity values will have a negative effect on Britain’s net wealth, with the lowest results in the history of the 11-year study prompting the group to predict further declines in household expenditure in the next 12 months.
According to results, consumer spending has been at odds with the financial reality of today’s economic environment, with people continuing to spend despite warnings of worsening conditions. However, the current credit crunch seems to have finally halted the growth in spending, with the simultaneous drop in equity value and house price growth forcing people to reconsider their monetary situation.
For those who have found themselves under greater financial pressure than they had anticipated in recent months, a personal loan may be of assistance in ensuring that repayments on credit cards, household bills and other items of expenditure can be met without punitive late fees being incurred.
Head of Alliance Trust Research Centre Shona Dobbie said: “Our latest report highlights that consumers are starting to feel the pinch of financial reality, and are showing signs of reining in spending. Our measure of consumer wellbeing shows households are facing increased headwinds in terms of their finances, as food and energy prices move higher, house price growth slows and equity markets decline. These combined factors give us a bleak view of consumer spending and confidence for the next 12 months. To add further pressure on household budgets there are millions of homeowners who are coming to the end of cheap fixed-rate mortgage deals, who will now face higher repayments.”
She added over the course of the past two years, consumer debt - such as that owed on credit cards or personal loans - had increased as well as consumer spending, but even though this may now have stalled, with equity and property markets falling, net wealth could drop even further in the coming months.
Much of the constraints imposed on household spending was attributed to low growth in disposable income, high council taxes and rising mortgage costs, while an overall increase in the costs of essential items such as food, energy and water further compounded restrictions on average budgets. Statistics cited by the company suggest that food prices have increased by six per cent during the past 12 months, while fuel costs are found to have risen by more than a fifth. For those people who have found themselves unable to cope with the rising costs of living, a debt consolidation loan may be of assistance in allowing people to make affordable monthly repayments towards their arrears.
In a report published last month by Savings Brake, it was revealed that levels of borrowing on items such as credit cards and personal loans were increasing, as were total deposits into savings accounts. The study found that for every pound that was saved during to course of 2007, 52 pence was borrowed.
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