UK households dipping into savings to cover costs

Households’ confidence in their finances has grown more pessimistic as employment earnings growth slowed to its lowest rate since February, new research has found.

An index monitoring consumers’ financial health dropped from 45.7 to 45.1 between September and October, survey compiler IHS Markit revealed on Monday, though the level of negativity was lower than the average levels since 2009.

Roughly three quarters of households expect an increase in interest rates from the Bank of England within the next year and approximately half of UK households expect one in the next six months. People are also the least upbeat on the outlook for property prices since before the Brexit referendum.

Employment earnings continued to grow for the 12th month in a row, but at a slower rate, leading households to use savings and unsecured credit to keep up spending.

This led the to the most downbeat assessment of current finances seen in the past three months, said Joe Hayes, economist at IHS Markit, with households more concerned about their future budgets.

Hayes added that overall sentiment may have been impacted by a drop in the property price outlook.

“The dip in official UK inflation statistics caught markets off-guard last week, but households surveyed in October by the HFI pared back their inflation expectations to the lowest in two years,” said Hays.

Perceptions of job security have remained negative has remained negative since the survey was started in 2009, but October's was the "second-least negative". Retail sector employees were the most anxious about their job security.