One in five left with less than £100 disposable income each month
Many UK consumers are “chronically underprepared” for additional costs associated with a possible rate rise before year end and the uncertainties surrounding the Brexit outcome, according to a report.
The Base Rate, Brexit and Bills report from Nationwide Current Accounts looked at the financial realities facing UK consumers, such as rising inflation, slow wage growth and credit reliance.
Almost half (44%) of Brits agree there will be financial consequences as a result of Brexit, anticipating increases on the price of food (56%), holidays (49%), utilities (42%) and fuel (38%). One in ten (11%) are already cutting back and 10% are saving in anticipation of a Brexit impact and twice as many ‘Remain’ voters have reduced spending than their ‘Leave’ counterparts (16% vs 8%).
Others are putting off borrowing money (6%), buying a home (5%), a new car (5%), or even moving jobs (5%) as a direct result of Brexit concerns.
For mortgage holders, Nationwide found that the average household spends 24% of their income servicing the debt while one in 10 spend 50%.
After paying for housing and bills, one in five are left with less than £100 of disposable income each month. While 62% said they could cope with a rate rise, 8% would need to consider taking drastic changes. The report found 9% would need to cut spending elsewhere in order to make ends meet while 11% said they have already cut back spending on food.
As such, 43% said they couldn’t cut back any further on their food shop and would therefore look for more deals and reduced items to cope. 28% use their credit card for everyday expenses while 16% rely on their overdraft. One in 10 have had to turn to family to help them out and 2% have pawned their possessions to raise some cash.
Nevertheless, Brits are increasingly savvy with their spending, as 51% shop around for their car insurance at renewal and two in five haggle over the cost of TV and phone service while more than a third (38%) regularly switch energy providers. One in seven (14%) have also used the low base rate period to overpay their mortgage to clear their debt sooner, while 4% have made additional contributions to their pension.
Dan Wass, Nationwide’s director of banking and insurance, said: “We’re facing uncertain economic times, so it’s interesting to see what consumers make of it all and how this is already influencing their thinking about day-to-day finances. While we don’t know what the effects of Brexit will be or indeed when the Bank base rate will rise, now is the time to take action – ensuring you have the best products and services to meet your needs.”