Credit crunch is starting to take its toll

Following the FSA and CML's warnings on the impact of the credit crisis on the UK housing market, new research from Bradford & Bingley reveals that the credit crunch is starting to take its toll on consumer spending levels.

Over a fifth (21%) have concerns about their borrowing and, as such, are reining in their spending. However, a resolute 40% are still determined to keep on spending, particularly amongst the under 25s.

The research, conducted by GfK NOP on behalf of Bradford & Bingley, shows that a further 11% are planning to cut back on their spending following concerns about their current borrowings and the prospect of having to make higher repayments. 10% are definitely going to spend less and start saving more.

Paul Whitlock, head of savings at Bradford & Bingley comments: "It appears that the credit crunch is now having a tangible impact on consumer behaviour. There are still a number though, particularly among the under 25s, who are continuing to bury their heads in the sand and are not being deterred by the prospect of higher borrowing costs and a tougher credit environment. It's crucial now that they start heeding the warnings as the credit crunch is likely to bite well into next year."

4 in 10 persist in burying their heads in the sand

A resolute 40%, however, plan to continue to spend and shop as normal, despite higher borrowing costs and a possible slowing of the economy.

Indeed a staggering 48% of the under 25s are devoted shoppers/spenders, even though many in this age group are wanna-be first time buyers struggling to climb onto the ladder. 43% of this age group said they would continue to spend and shop as normal, despite the global credit crisis.

Under 25s the most rash when it comes to splashing the cash The under 25s are also the most rash when it comes to spending money. 15% buy now and think about the consequences later (compared to the national average of 6%); almost half (49%) try and live within their means but do sometimes overspend (37% national average) and only a third (34%) manage to successfully live within their means (against the national average of 56%).

Reformed shop-aholics

This is in contrast to the older generation, 68% of whom (those in the 55-64 age bracket) only spend what they can comfortably afford. 40% of 55-64 year olds are committed savers, with a third reformed shoppers. Only 16% remain keen spenders.

Furthermore, unlike the under 25s, many 25-34 year olds are making conscious efforts to cut back on their extravagant lifestyles. A quarter are committed savers and 41% are reformed shoppers who now see the virtue in planning for the future.

Savers unite

Reassuringly, a third of respondents revealed that they are already committed savers with a further 36% saying that they are careful about their spending. Even for those who like splash out, there is hope, with over one in four (27%) saying that they are reformed spenders who now want to save more.

Paul Whitlock continues: "Increasing numbers are moving away from the carefree spending of recent years, to more cautious, prudent planning. However, there is still a long way to go before consumers say goodbye to the "buy now, pay later" culture that has characterised recent years and revert back to the more sensible "save now, buy later" ethos."