Consumers brace themselves for a rocky ride

Britons are losing faith in the UK economy and believe their finances will enter a turbulent time over the next 12 months according to new research from Selftrade’s ‘Trading Up’ campaign.

Three in five people (62%) fear that interest rates will rise beyond the current rate, one in four (26%) think that job security looks poor and almost one in five people (18%) believe that the UK housing market will enter a period of negative equity.

While the Bank of England’s Monetary Policy Committee raised interest rates last week for the fourth time since August, the research suggests that consumers think that this is only the tip of the iceberg – believing that rates will continue to rise beyond the current rate of 5.5% over the next twelve months.

Selftrade asked a GB representative sample of 2,000 people what they think the outlook will be for the economy over the next 12 months.

The Housing market

Britons are totally confused by the variants in the housing market. While 28% of people think the housing market will continue to boom in the next 12 months, in contrast, 18% of people think the UK housing market will crash and we will enter a period of negative equity.

Young people are worried about the effect the economy will have on their ability to buy a house, with 27 % of 18-20 year olds and 29% of 20-30 year olds thinking the housing market will continue to boom, while 24% and 50% respectively will be concerned that interest rates will rise above their current rate – pushing mortgage payments up again.

Job security

Over one in four people (26%) worry about job security, with the older generation worrying the most – 36% of 50 year olds worry that they may be out of a job in the next 12 months.

People living in Wales and Midlands (29%) worry the most about job security, followed closely by people living in the South (27%).

The Economy

14% of people in the UK believe that the UK economy may enter a recession, with almost one in five (19%) people in their 40s worrying that they will relive the experience of the recession in the early 90’s.

62% of people think that interest rates will rise beyond the current rate, with only 3% of people believing that rates will remain at the current level over the next 12 months.

15% of people believe that the stock market will go up by more than 5% in the next 12 months, with men almost three times as likely as women (22 % vs. 8%) to opt for an optimistic view of the markets.

Politics

Tony Blair’s resignation announcement two weeks ago was good news for some of his electorate. One in five Britons (21 per cent) believed that if he didn’t resign the economy would suffer.

People in their 40s and 50s appear to feel particularly let down by Blair and his promises, with almost one in four people in their 40s (23 per cent) and 33 per cent of people in their 50s saying that the economy would have suffered had he not resigned. However, Tony Blair does appear to have his fans, with only nine per cent of people in the North East, which includes his constituency of Sedgefield in Country Durham, saying that his resignation would save the economy.

Neil Jamieson, Retail Marketing and Business Development Director, Selftrade said: “Our research shows that people are feeling unsure about the UK economy. This has obvious knock-on effects on people's perceptions of job and financial security in the near term. Monetary tightening will inevitably serve as a dampener on consumer spending. Investors will want to rebalance portfolios if signs emerge of a significant slowdown in the UK economy.

Among Selftrade customers we have noticed that people are starting to hold more cash and less speculative investments as the market hovers close to historic highs. Markets inevitably correct from time to time and the current bull run is one of the longest on record having lasted since 2003. Corrections present opportunities for savvy investors to pick up good long-term investments on the cheap.”