In light of rising mortgage rates and inflation, UK consumers are taking various actions to cope with increased financial stress, KPMG UK’s latest Consumer Pulse research shows.
Conducted in September, the survey engaged 3,015 consumers across diverse age groups, income levels and regions.
Of those surveyed, 37% hold a mortgage, 34% own homes but are mortgage-free, 22% are renters, and 7% live with family.
When asked about their response to the potential or existing rise in mortgage rates, 18% of mortgage holders indicated they have used savings to decrease their mortgage balance. An additional 25% are considering doing so.
Similarly, 16% have shifted to interest-only mortgages, with 24% contemplating the change. Actions like extending mortgage terms or selling property to move to cheaper housing were considered by 12% and 8% respectively. Furthermore, 11% have cut back on pension contributions, and 20% are pondering the idea.
Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, said: “Whether it’s switching to interest-only mortgages, lengthening mortgage terms, reducing pension contributions, or selling property to move to something cheaper – this higher interest rate environment is causing between 10% to 20% of mortgage holders that KPMG surveyed to take significant steps to manage these higher costs.
“And up to a further quarter of people surveyed are also considering taking such measures, likely only waiting for when their fixed-term deal ends.”
In terms of spending, the study unveiled that 56% have reduced non-essential expenditure since the start of 2023. Cuts were most noticeable in categories like eating out, takeaways, and clothing, cited by 70%, 60%, and 60% of participants, respectively.
Ellett added: “As 2023 has progressed we have seen the number of shoppers having to make cost savings increasing.
“Around 40% of the consumers we survey say they are buying lower cost or promotional goods, with a third having switched to lower cost retailers.
“One in five say they are buying more pre-owned goods this year, which more positively could also reflect environmental drivers.”
On the topic of savings, the survey found that 27% are currently using their savings to cover essential household costs, while 70% have not had to do so. The average amount in savings among those surveyed was just under £8,000, though this varied widely by age.
The survey also touched on feelings of financial security, revealing that 21% feel more financially secure now than they did at the start of 2023, while 34% feel less secure.
