A new report from Nationwide Current Accounts, Base Rate, Brexit and Bills, has looked into the financial realities already facing UK consumers today.
It highlights that many are chronically underprepared for additional costs, and suggests that while any initial base rate rise isn’t expected to add significant cost to the average loan, the cumulative effect of possible multiple rises in the future, in conjunction with other pressures, could cause severe strain for those already feeling the pinch.
The report shows 44% of Brits agree there will be financial consequences as a result of Brexit, anticipating increases on the price of food (56%), holidays (49%), utilities (42%) and fuel (38%).
Findings include:
- 11% are already cutting back and 10% are saving in anticipation of a Brexit impact.
- Twice as many ‘Remain’ voters have reduced spending than their ‘Leave’ counterparts (16% vs 8%).
- Others are putting off borrowing money (6%), buying a home (5%), a new car (5%), or even moving jobs (5%) as a direct result of Brexit concerns.
- Despite the doom and gloom, 8% say they have decided to travel more, with more than double the amount of 18-24 year olds planning to travel ‘while they still can’ compared to those 55-plus (15% vs 6%).
Concerns appear to be amplified by the growing possibility of a base rate rise on the horizon, especially with 35% of the British population paying off a mortgage. The report shows:
- The average household spends 24% of income on mortgage/ housing costs; 11% spend 50%.
- After paying for housing and bills, 22% are left with less than £100 of disposable income each month.
- 62% feel they could cope with a rate rise but eight% would need to consider drastic changes.
- 9% would need to cut spending elsewhere in order to make ends meet
- 11% say they have already cut back their spending on food.
Finances are already under pressure for many, with some making sacrifices to make ends meet and 21% only just affording to get by. According to the report:
- 27% are paying off credit card bills, 12% car loans, 9% overdrafts, and 8% student debt.
- 28% use their credit card for everyday expenses, 16% rely on their overdraft, 10% borrow from family and friends, and 2%have even pawned their possessions.
- 44% can’t afford the expense of holidays, a fifth (20%) are shelving plans to move home, 10% have put off having children, while 20% are missing out on social occasions, such as weddings, due to the cost.
- 43% couldn’t cut back any further on their food shop, with 40% looking out for more deals, 34% searching for reduced items and a quarter (24%) changing where they shop for food to cut costs, with cost cutting being attributed to deals (40%), discounts (34%) and changing where they shop (24%).
- Despite this, while half of Brits (51%) look around when their car insurance comes up for renewal, 39% haggle over the cost of TV and phone services and 38% regularly swap utility providers, only 10% of mortgage holders say they would invest time in remortgaging to get a better deal.
Despite the positive effects of lower interest rates on most mortgage costs, some haven’t managed to save, whether for a rainy day or for emergencies. The poll shows:
- 55% have less than £1,000 in emergency savings, but 19% have nothing saved at all.
- In contrast, 45% have squirreled away more than £1,000, just in case.
- 21% say a rate rise would encourage them to save more.
- 14% have used the low base rate period to focus on overpaying their mortgage to clear their debt sooner, while 4% have made additional contributions to their pension.
Dan Wass, Nationwide’s director of banking and insurance, said: “We’re facing uncertain economic times, so it’s interesting to see what consumers make of it all and how this is already influencing their thinking about day-to-day finances.
“While we don’t know what the effects of Brexit will be or indeed when the Bank base rate will rise, now is the time to take action – ensuring you have the best products and services to meet your needs.”