Fall Recorded In Financial Confidence
Britons’ financial optimism is faltering, it has been revealed.
In CreditExpert’s personal credit index, the public’s monetary confidence fell over the course of the second quarter of 2007 to 96 – the largest quarterly decrease noted so far. According to the financial services firm, the decline was due to the effects of five interest rate increases by the Bank of England’s monetary policy committee (MPC) over the last 12 months and the unexpected flooding witnessed across the country in June.
Jim Hodgkins, managing director for CreditExpert, said: “Although national financial confidence has not quite hit an all-time low, we’re seeing great regional fluctuation quarter on quarter and, in London, the worst regional figure ever recorded. Interest rates are clearly hitting Londoners and southerners hardest as house prices are higher there and unfortunately for them, it’s looking as if things are going to get worse.” As a result, he advised that those who are feeling increasingly uncomfortable handling their day-to-day finances to take steps to manage their outgoings more effectively.
Wales and the Midlands were said to have seen the largest decrease during the second three-month period of 2007 in Britain, with indexes in the regions falling by nine points to 100. The flooding which took place last month was highlighted as a “cause of negativity” for homeowners in the area as they begin to replace goods damaged by water. However, CreditExpert stated that since more floods are currently hitting the region, consumer confidence is “likely to drop even further” over the forthcoming quarter.
Meanwhile, financial optimism in London was reported to have reached a record low as it fell from the 97 noted during the last quarter to 89, with the south continuing its “steady decline” to 92. According to the financial company, higher house prices in these regions have meant base rate increases by the MPC have a larger impact upon consumers’ ability to make secured loan repayments. However, with further rises predicted to happen, CreditExpert suggested that credit confidence in the capital could “tumble” over the coming months. Only Scotland and the north of England were indicated to have been bucking the national trend, where financial confidence increased by two points to 99 over the quarter. However, this figure was still reported to be below the index’s starting level.
The study also indicated that four per cent of borrowers are reported to feel “very uncomfortable” about how much money they owe through secured personal loans, credit cards and other forms of borrowing. Meanwhile, some eight per cent of Britons (four million) are “fairly uncomfortable” about their level of debts. Figures from the firm also showed that less than half (48 per cent) of adults are “very confident” about paying their bills on time. However, the proportion of those reported to be “not very confident” meeting demands for payment has risen to nine per cent or about three million people.
Earlier this year, a Datamonitor study revealed that consumer credit uptake is beginning to slow after a decade of growth. The report indicated that a combination of increased consumer debts, a fall in public financial confidence and weakened employment prospects saw lending fall by 4.5 per cent over the course of 2006 to £207.8 billion.
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