As a result, consumer card spending on non-essential items slowed to its lowest level in 18 months
Despite growing stability in UK housing costs, which saw their lowest rise in 12 months, many consumers are still cutting back or looking for additional sources of income as they continue to feel the impact of last year’s volatility, shows new data sourced from millions of Barclays current accounts.
As a result, consumer card spending on non-essential items dropped to its lowest level in 18 months.
Barclays data shows that Britons spent just 1.8% more on their mortgage and rental payments in March compared to last year. This was far below the 12.2% rise logged in June 2023 (when growth was at its highest), and the lowest YoY rise on file since March 2023.
Nevertheless, 16% are not confident in their ability to meet their mortgage or rental payments, and 18% are adjusting their spending habits to cope with increasing housing costs.
To improve energy efficiency and safeguard against future energy price shocks, one in 10 homeowners are taking steps to retrofit their property. To generate additional income, a comparatively small percentage of homeowners (3%) have started renting out a room in their house in the past year. Nonetheless, this figure increases to 12% for homeowners in London.
Many renters say they are losing out because demand is outpacing supply – 22% feel that there is too much competition for rental properties in their area, resulting in less value-for-money. As the current cost of living makes building sufficient savings more challenging, one in four renters (25%) also cites the cost of a deposit as the biggest hurdle to home ownership.
More widely, household spending (e.g., DIY and electronics) dropped -5.2% in March, with 16% holding off home renovations due to current economic pressures.
After reaching its highest level since November 2021 in February (59%), consumers’ confidence in their ability to spend on non-essential items slid to 55% in March. However consumers’ confidence in their household finances remained steady in March, at 67%.
Mark Arnold, head of savings & mortgages at Barclays UK, noted: Non-essential spending is still reeling from last year’s rise in housing costs, which caused both homeowners and renters to cut back while looking for additional sources of income – such as delaying renovations and renting out spare rooms.
He added: However, there are reasons to be optimistic – our data shows that housing costs are stabilising, the inflationary tide is easing, and interest rates are forecasted to drop over the coming months, all of which should translate into increased consumer confidence and spending.