People are digging into savings and cutting back on spending as they respond to increasing mortgage rates
KPMG UK’s latest Consumer Pulse research found that Used savings to reduce outstanding mortgage balance: 18% have, 25% considering.
Responding to the findings, Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for KPMG, said:
“Whether it’s switching to interest-only mortgages, lengthening mortgage terms, reducing pension contributions, or selling property to move to something cheaper – this higher interest rate environment is causing between 10 to 20 percent of mortgage holders that KPMG surveyed to take significant steps to manage these higher costs. And up to a further quarter of people surveyed are also considering taking such measures, likely only waiting for when their fixed-term deal ends.
“Inevitably, increased household budget and savings being used to pay the mortgage, or higher rent cost, will continue to lead to less money being spent elsewhere within the economy by consumers, which will continue to challenge both retailers, brands and leisure businesses.”
With various household essential costs remaining elevated, over half of the consumers surveyed said that they have had to reduce their non-essential spending since 2023 began. Only 4% said they have been able to increase non-essential spending this year.
Eating Out, Takeaways and Clothing are the top three things that people reducing their non-essential spend have cut back on so far in 2023.
A third of consumers said that they have switched to shopping at less expensive retailers, while one in five said they are buying more pre-owned items this year.