Household finances worsen in February

UK HOUSEHOLDS experienced the sharpest fall in financial health for seven months in February due to rising living costs and low wage growth, according to the latest IHS Markit Household Finance Index.

The index, released on Monday, dropped to 42.2 from 42.9 in January, the lowest figure since July 2017.

Inflation remained at three per cent in January, putting pressure on household finances. Meanwhile, people’s living costs increased at the fastest rate for 12 months, according to the index.

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“The latest survey adds to evidence that UK households have seen an erosion of their financial wellbeing so far this year, with stubbornly high inflation the main factor placing pressure on consumer budgets,” said Tim Moore, associate director at analytics firm IHS Markit.

Cash for household spending fell at the fastest rate for 10 months, whilst employment increased at the lowest rate since November 2017, further blunting households’ appetite for major purchases.

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More households anticipate higher borrowing costs later in the year. 60 per cent of people surveyed think the Bank of England will raise interest rates in the next six months, while 37 per cent expect a rate rise in the next three months.

“The latest fall in the Household Finance Index further underlines just how much pressure consumers are under after over a year of consistent price increases,” said Samantha Seaton, chief executive of financial management app Moneyhub.

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