Rising mortgage costs were offset by falling energy bills in July, while the Bank of England’s base rate reduction on 1st August gave consumers a confidence boost, the latest Barclays Property Insights report has revealed.
Meanwhile, renters and homeowners became increasingly interested in news about the economy, to have a better understanding of the factors impacting their housing costs.
Consumer spending on rent and mortgages increased by 5.7% year-on-year in July, which was a noticeable jump compared to June’s more stable growth of 1.5%.
That said, rent and mortgage payments declined by 3.8% month-on-month, and Ofgem’s recent energy price cap reductions caused spending on utilities to fall 7.5%.
As a result, there was no change in consumers’ confidence in being able to stay on top of rent and mortgage payments, remaining stagnant at 53%.
Encouragingly, the Bank of England base rate reduction on 1st August has had a positive impact on consumer confidence.
Nearly six in 10 said it made them feel more confident in their ability to live within their means, and just over half said they feel more confident about their household finances.
Three in 10 mortgage holders also said that they expect their monthly costs to decrease in the near future, as a result of the base rate reduction, while half anticipated no change, likely due to the prevalence of fixed-rate mortgages.
Looking at the impact of rising costs, renters reported that they felt much more exposed than homeowners.
Eight in 10 renters said that they were worried about the impact of rising housing costs on their personal finances, which is nearly double the rate for homeowners (43%).
Renters were also less likely to have an emergency savings fund to cover unexpected bills, at 17% compared to 24% of homeowners.
Despite most Brits either owning a home or aspiring to be future homeowners, consumers were less familiar with the factors that influence mortgage rates.
While 88% of people were aware of the Bank of England Base Rate, over a quarter (26%) reported that they did not understand what it means, and 35% had never heard of the Monetary Policy Committee (MPC).
Swap rates were even less well recognised, with half (49%) having never heard of them.
That said, there were signs that Brits were investing more time into understanding how the market works.
Nearly one in six renters and mortgage holders said they had become more engaged in news around the economy in the last year, given the impact on their housing costs, particularly among 18 to 34-year-olds.
For mortgage holders, news coverage was the top source of information selected (31%) for where to seek more information about how the Base Rate impacts their mortgage, closely followed by consumer advice websites (27%) and mortgage providers (25%).
A fifth of 18 to 34-year-olds said they go to friends and family, and a fifth cited social media as a main source of information.
In contrast, these sources were only selected by 4% of over-55s.
Mark Arnold, head of savings and mortgages at Barclays, said: “The base rate reduction on 1st August was certainly a promising sign for UK homeowners and the wider economy, with over half of consumers saying it made them more confident in their household finances.
“However, it’s important to remember that unless you’re a homeowner on a variable or tracker mortgage, it may be some time before you notice a tangible difference in your monthly bills.
“For example, those on fixed-rate mortgages will need to wait until they roll off or remortgage to determine whether their repayments will rise or fall, and for renters there’s even less of a clear cause and effect when it comes to pricing.
“Whilst it’s by no means mandatory for homeowners to understand the inner workings of the mortgage market, it’s encouraging to see consumers staying on top of financial news, so they can be empowered to make the best financial decision when the time comes.”
Phil Spencer, TV property expert, added: “The Base Rate change is a welcome turning point after a long period of volatility, but when it comes to mortgage and rental payments, its impact is perhaps more symbolic than tangible.
“In addition, the base rate is by no means the only metric to consider when you’re thinking about housing costs.
“Changes like the Ofgem energy price cap often have a more immediate impact, so consider your monthly outgoings holistically.
“Price changes can sometimes offset each other, or even compound, and it’s important to know where you stand, especially if you’re considering your affordability for a mortgage.”