Falling energy bills offset higher rent and mortgage costs in July
- Consumer spending on utilities fell by -7.5 per cent in July, as Brits continue to benefit from Ofgem’s energy price cap reductions
- Spending on rent and mortgage payments increased year-on-year, while the Bank of England base rate reduction on 1st August has given consumer confidence a bounce
- Brits are taking steps to improve their understanding of the UK economy, however financial jargon like ‘MPC’ and ‘swap rates’ remains a stumbling block
- Phil Spencer, TV property expert, encourages consumers to consider all their regular financial commitments when budgeting for their housing costs
- Barclays Property Insights combines transaction data from millions of Barclays current accounts with consumer research to provide an in-depth look at UK housing costs
The latest Barclays Property Insights report reveals that rising mortgage costs were offset by falling energy bills in July, while the Bank of England’s base rate reduction on 1st August gave consumers a confidence boost – even though half of mortgage holders recognise it won’t impact their repayments in the near future. Meanwhile, renters and homeowners are becoming increasingly interested in news about the UK economy, to have a better understanding of the factors impacting their housing costs.
Consumer spending on rent and mortgages increased by 5.7 per cent year-on-year in July, which was a noticeable jump compared to June’s more stable growth of 1.5 per cent. That said, rent and mortgage payments declined -3.8 per cent month-on-month, and Ofgem’s recent energy price cap reductions caused spending on utilities to fall -7.5 per cent. As a result, there was no change in consumers’ confidence in being able to stay on top of rent and mortgage payments (53 per cent).
Encouragingly, the Bank of England base rate reduction on 1st August has had a positive impact on consumer confidence. Nearly six in 10 (57 per cent) say it made them feel more confident in their ability to live within their means, and just over half (51 per cent) feel more confident about their household finances. Three in ten (27 per cent) mortgage holders expect their monthly costs to decrease in the near future, as a result of the base rate reduction, while half (50 per cent) anticipate no change, likely due to the prevalence of fixed-rate mortgages.
On the other hand, retail spending on household categories continued to struggle in July – home improvements & DIY declined for the 13th consecutive month, down -7.5 percent. Similarly, garden centres fell -0.6 per cent, though this was a marked improvement compared to -12.7 per cent in June. This comes as two in five (39 per cent) report that July’s rainy weather caused them to rein in their “summer spending”. However, some are making the most of staying indoors due to the bad weather – one in six homeowners (15 per cent) say they are making improvements to their home while they have more free time.
Renters feel hardest hit by rising costs
Looking at the impact of rising costs, renters feel much more exposed than homeowners. Eight in 10 (80 per cent) renters say they’re worried about the impact of rising housing costs on their personal finances, which is nearly double the rate for homeowners (43 per cent). Renters are also less likely to have an emergency savings fund to cover unexpected bills (17 per cent compared to 24 per cent).
Brits crack the code on financial jargon
Despite most Brits either owning a home or aspiring to be future homeowners, they are less familiar with the factors that influence mortgage rates. Whilst 88 percent are aware of the Bank of England Base Rate, over a quarter (26 per cent) report not understanding what it means, and over a third (35 per cent) have never heard of the Monetary Policy Committee (MPC). Swap rates (which are an indication of where the base rate will be in future and help determine pricing for fixed-rate mortgages) are even less well recognised, with half (49 per cent) having never heard of them.
That said, there are signs that Brits are investing more time into understanding how the market works. Nearly one in six renters and mortgage holders (15 per cent) say they have become more engaged in news around the UK economy in the last year, given the impact on their housing costs, particularly amongst 18-34-year-olds (22 per cent).
For mortgage holders, news coverage was the top source of information selected (31 per cent) for where to seek more information about how the Base Rate impacts their mortgage, closely followed by Consumer Advice websites (27 per cent) and Mortgage Providers (25 per cent). A fifth of 18-34-year-olds (22 per cent) said they go to friends and family, and a fifth (19 per cent) cited social media as a main source of information. In contrast, these sources were only selected by 4 per cent of over 55s.
Consumers looking for further guidance on how to manage their finances can look to Barclays LifeSkills for a wealth of resources explaining personal finance terms and topics, from basic budgeting to mortgages and debt management. Extensive guides on buying a home can also be found at the Barclays Mortgage Support Hub.
Mark Arnold, Head of Savings and Mortgages at Barclays, said: “The base rate reduction on 1st August was certainly a promising sign for UK homeowners and the wider economy, with over half of consumers saying it made them more confident in their household finances.
“However, it’s important to remember that unless you’re a homeowner on a variable or tracker mortgage, it may be some time before you notice a tangible difference in your monthly bills. For example, those on fixed-rate mortgages will need to wait until they roll off or remortgage to determine whether their repayments will rise or fall, and for renters there’s even less of a clear cause and effect when it comes to pricing.
“Whilst it’s by no means mandatory for homeowners to understand the inner workings of the mortgage market, it’s encouraging to see consumers staying on top of financial news, so they can be empowered to make the best financial decision when the time comes.”
Phil Spencer, TV property expert, said: “The Base Rate change is a welcome turning point after a long period of volatility, but when it comes to mortgage and rental payments, its impact is perhaps more symbolic than tangible.
“In addition, the base rate is by no means the only metric to consider when you’re thinking about housing costs. Changes like the Ofgem energy price cap often have a more immediate impact, so consider your monthly outgoings holistically. Price changes can sometimes offset each other, or even compound, and it’s important to know where you stand, especially if you’re considering your affordability for a mortgage.”
Notes to editors
*Mortgage and rental payments data sourced from Barclays current accounts – e.g. transactions identified as direct debits and bank transfers to mortgage lenders and private landlords. Please note: the data includes payments to multiple lenders (including Barclays). It relates to the period 24th June 2023 – 21st July 2023 vs 22nd June 2024 – 19th July 2024.
Across its issuing and acquiring businesses, Barclays sees nearly 40 per cent of the nation’s credit and debit card transactions, which provides us with unique insight into UK consumer spending. This press release is based on consumer card spending data from Barclays’ issuing business – i.e. Barclays debit card and Barclaycard credit card transactions. It relates to the period 24th June 2023 – 21st July 2023 vs 22nd June 2024 – 19th July 2024.
The Barclays Consumer Spend research in this press release was carried out between 19th and 23rd July 2024 by Opinium Research on behalf of Barclays. There were 2,000 respondents in each round of research, providing a representative sample of UK consumers by age, gender, region, and income group.
For more information, please contact Annie McQuoid at annie.mcquoid@barclays.com
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About Barclays Market and Customer Insights
Barclays Market and Customer Insights helps businesses keep up to date with spending trends, monitors their market position and enhances their understanding of customer behaviour, based on actual customer spending. For further information, please email contact-MCI@barclays.com.