The latest data from Barclays shows that growth in mortgages and rent spending fell to the lowest level in 17 months, following the reduction to the base rate on August 1.
The feeling is that consumers have more confidence in their household finances, although there are ongoing concerns about rent and mortgage affordability.
Since the Bank of England dropped the base rate by 0.25% at the start of August, rent and mortgage spending grew by just 1.1% in August, the lowest rate since March 2023.
Warmer weather and the Ofgem energy price cap have helped consumers to save on energy bills, leading to a fourth consecutive month of falling utilities spending, falling 11.4% year-on-year.
There has been a rise in confidence in the UK housing market, rising from 25% to 29% during the same four-month period. However, only a small proportion of consumers will be enjoying the benefits of the recent interest rate reduction, as 78% of mortgage holders reported that they have a fixed rate deal.
In the rental sector, 20% of renters reported that they get less value for their money due to high demand in the market. This rises to 26% in the 18-34-year-old group. And as students enter the market for the new academic term, young renters are also facing additional pressures, with 17% saying there is too much competition due to the influx. Only 14% of 18-34-year-old homeowners are considering selling their home, with 28% saying that retrofitting is a better option, with plans to make their properties more energy efficient.
Mark Arnold, head of mortgages and savings at Barclays, said: “In the year to date we’ve seen encouraging signs that spending on rent and mortgages is decelerating on the whole, but unsurprisingly it isn’t a linear descent and we could see some volatility over the coming months, despite the recent interest rate cut.
“Many people think that interest rates are what really determine the mortgage market – and whilst that’s true to some extent, for me, the biggest driver is confidence. If you're going to make the biggest purchase of your life, you need to be confident that the economy is stable, inflation is under control, and you know what you're going to pay. That stability and confidence will determine how people spend, even for renters.”
