A new report has examined how consumers are adjusting their spending habits and managing higher mortgage rates in response to inflation. These insights were revealed in the latest Consumer Pulse research conducted by KPMG UK.
The Consumer Pulse survey conducted by KPMG tracks the responses of over 3,000 consumers across various age groups, income levels, and regions in the UK, focusing on their reactions to the rising cost of living crisis.
The survey, which polled 3,015 consumers in September, included individuals with different housing situations: 37% had a mortgage, 34% were homeowners without a mortgage, 22% were renters, and 7% lived with family.
When asked about their response to the immediate or potential increase in mortgage rates, the 1,096 mortgage holders surveyed provided the following insights:
– 18% have used their savings to reduce their outstanding mortgage balance, while 25% are considering doing so.
– 16% have switched to an interest-only mortgage, with 24% considering this option.
– 12% have extended the duration of their mortgage term, while 25% are contemplating this action.
– 8% have sold and moved to a more affordable home, with 22% considering this move.
Additionally, 11% stated that they have reduced their pension contributions, and 20% are considering doing the same.
In response to these findings, Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for KPMG, commented on the significant measures being taken by mortgage holders to manage the higher costs brought about by the current interest rate environment. Ellett stated that around 10% to 20% of the surveyed mortgage holders are taking such actions, while a further 25% are considering doing so once their fixed-term deals end. This will inevitably result in reduced consumer spending in other areas, posing challenges for retailers, brands, and leisure businesses.
The survey also revealed that due to the ongoing elevated costs of essential household items, 56% of the consumers surveyed reported having to reduce their non-essential spending since the start of 2023. Only 4% stated that they had been able to increase their non-essential spending this year. Among the areas where spending cuts were made, eating out (70%), takeaways (60%), and clothing (60%) were the top three categories.
Furthermore, consumers continue to change their buying behavior to save more money, with an increasing number focusing on getting the best value for their purchases compared to the previous year.
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