Last month's interest rate rise is beginning to affect consumer confidence, it has been revealed.
According to figures released by GfK NOP, the Consumer Confidence Index score dropped by a point over the course of June to stand at -3. The fall was attributed to the decision by the Bank of England's monetary policy committee (MPC) to increase the base rate to 5.5 per cent, which could impact upon borrowers' ability to make secured loan repayments.
Rachael Joy, consumer confidence representative for GfK NOP, said: "After an eventful May, this month sees the higher interest rates taking effect. Consumers have a more negative impression of the general economic situation with a six-point drop this month. Whilst at the same time, consumers are also taking advantage of the situation and the 'now is a good time to save' index has increased this month and now stands at its highest level in recent years."
Figures from the market research company also indicated that Britons are in a record mood to save money. In a move which could see them offsetting debt management and loan payment difficulties, the index for those thinking "now is a good time to save" rose by one to +36, the highest level GfK NOP claimed to have recorded in recent years. This figure was also reported to be four points higher than the score for last June.
Meanwhile, Britons' views towards their personal finances were said to have remained unchanged this month. The index recording consumers' view of their monetary situation over the past 12 months was reported to be +3 - the same figure recorded in May. Opinions about personal finance during the forthcoming year had also remained consistent, remaining at +13, a score which was also noted in June 2006. The study also indicated that trend for making major purchases rose throughout June to +6. However, this was said to be five points lower than figures recorded during the same month last year.
Overall, consumers' views about the British economy over the past 12 months were said to have seen "the biggest change" throughout the course of June. With a score of -24, GfK NOP reported that the index has fallen by some six points. Meanwhile, outlook about the general monetary situation was noted to have stayed at the May figure of -10. However, this was some eight points higher from the same study carried out in June last year.
However, according to a study released by financial charity Credit Action there is a shortfall of savings among Britons. Just over one in four (27 per cent) consumers are said to not have any money set aside, with a further 25 per cent holding savings of less than 3,000 pounds. Meanwhile, three million Britons describe themselves as "frivolous spenders", as they decide to make purchases based on desirability instead of affordability. Overall, two out of three was said to subscribe to 'the buy now, think later culture' which may consequently see them struggle to make loan repayments.
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