UK: Family finances suffer steepest decline since the recession
By Daily Mail Reporter
Family finances suffer steepest decline since recession as more are forced to dip into their savings
More and more of us are increasingly having to dip into our savings to cover the rising cost of living, research suggests.
Six times as many households (36 per cent) reported seeing their finances deteriorate this month, compared with those who saw an improvement (6 per cent), according to the Household Finance Index (HFI) carried out by Markit.
One in five admitted to taking on more debt during June to cope with falling incomes and increased prices, with just 15 per cent saying they had managed to reduce their debts in the month.
The number of people seeing an increase in household spending rose for the fourth month in a row, to 29 per cent, while 30 per cent reported seeing a fall in their overall savings.
The latest figures meant the overall HFI index fell to 35.1, its lowest level since March 2009, in the height of the recession.
A figure under 50 represents a decline in households’ positions on the previous month.
Tim Moore, senior economist at Markit, said the decline poured cold water on the tentative signs of improvement seen in the previous month.
‘The grim figures show household finances deteriorating at the fastest pace since early 2009, with people eroding their savings and taking on more debt to finance strong rises in living costs, as income from employment continued to fall in June.’
The majority of those surveyed (83 per cent) expected inflation to push their cost of living up further.
It currently stands at 4.5 per cent, more than twice the Government’s target figure of 2 per cent, following a surge in petrol costs and energy bills.
And some 50 per cent said they thought their financial situation would worsen, with just 19 per cent expecting theirs to improve.
The figures come amid continued fears over job security and falling house price values.
Some 22 per cent of respondents reported feeling less secure in their jobs, the survey found, while just 6 per cent felt more confident.
Meanwhile three times as many households reported a fall (21 per cent) in the value of their property as those which indicated a rise (7 per cent).
Lower house prices were reported in all regions except London, with the sharpest fall signalled in the east of England.
However there was confidence that the market would improve over the next 12 months, the survey found.
No spring bounce for the property market
The falling amount of money being lent to people buying a new home supports recent gloomy data on house prices.
Earlier this month, the Royal Institution of Chartered Surveyors said house prices dropped by 1.1 per cent in April as the property market failed to benefit from its traditional spring bounce this year.
It blamed concerns about the economy and the ongoing problems in the mortgage market.
Meanwhile, the Halifax said house prices fell at their fastest annual rate for 19 months in May as buyers continued to stay away from the market.
Homes lost 4.2 per cent of their value during the past year, based on average prices during the three months to the end of May, compared with the same three-month period of the previous year.
It was the biggest annual drop recorded since October 2009 and left the average home costing £160,519.
Howard Archer, chief economist at IHS Global Insight, believes that house prices will fall by 10 per cent over the next year from their peak in mid-2010.
He said: ‘We believe that modest falls in house prices are likely over the coming months as squeezed purchasing power, tightening fiscal policy and the possibility of gradually rising interest rates before the end of 2011 weigh down on potential buyers.