Consumer confidence is crumbling as the reality of the credit crunch starts to bite, according to a report from uSwitch.com.

Shock waves from the fall-out of the Northern Rock crisis, interest rate uncertainty and the slowdown in property prices have left 35% of people concerned about the impact Britain’s current economic situation could have on their own finances.

More than 15 million people feel financially worse off today, and this in turn is taking its toll on lifestyle and spending plans. More than half of consumers say that now is not the time to make life-changing decisions such as changing jobs, buying a home or having a baby.
In the last three months, 22% of people say they have cut back on retail spending. However, this scaling back on spending may be too little, too late.

Britain’s love of borrowing, fuelled by an era of easy credit, has left consumers more than £1.38 trillion in the red. For some, the love affair has already turned sour. Around 9% of consumers are trapped in a vicious circle where they may need to get further into debt to meet existing financial obligations and 13% may need credit just to help meet their living costs.

Ann Robinson, director of consumer policy at uSwitch.com, said: “This is crunch time for consumers and it couldn’t come at a worse time of year. In the run-up to Christmas, traditionally one of the biggest periods of consumer spending, people are feeling less well-off and are worried about the future. They are concerned about their jobs, their homes and their ongoing ability to manage their debts and bills. The days of easy credit and the ‘buy now pay later’ culture may be numbered, but they will leave a painful reminder for those left struggling with debt.

“More than half our take home pay is now eaten up by debt repayments, but our ability to repay and manage this debt is clearly faltering. The banks are being forced to write-off vast sums and, as a result, they are tightening their lending belts. This means that credit will become both harder for consumers to get and more expensive. The credit crunch will claim casualties – it will be enough to tip some over-indebted households over the edge. But there are positive signs that consumers are already cutting back, curtailing spending and trying to clear their outstanding debt. With a careful eye and a steady hand on the household budget, most should be able to weather the storm.”