The slowing income growth and rising mortgage rates coupled with high inflation led to a sharp decline in UK consumer spending power last month.
According to one report, consumers are more than £100 (S$201) worse off than during the same period in 2011, while a consumer sentiment survey revealed that mortgage holders are feeling the pinch from recent interest rate hikes.
At the same time, home prices were stagnant in May, as the usual spring bounce failed to materialise. The Office for National Statistics (ONS) also recently modified its outlook for the construction sector, noting that the country was in a deeper recession than first thought.
Tim Moore, Senior Economist at financial information services provider Markit said, “May’s survey shows another intensification of the household finance downturn, with the trend moving into full-scale reverse after some encouraging signs earlier in the year”.
“With some mortgage borrowers being hit by rising repayments as higher standard variable rates come through, these households noted the biggest stretch on their finances and cash availability since last autumn.”
Meanwhile, property portal Rightmove’s recent house price survey indicated an average price of £242,759 (S$488,607) this month, the first time in the report’s 11-year history that the month has not seen a price increase.
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