Spending on rent and mortgages rises 6.3%

Data sourced from millions of Barclays current accounts has indicated that spending on rent and mortgages increased 6.3 per cent year-on-year in May – faster than April’s uplift of 3.6 per cent. However, signs of optimism are emerging owing to falling inflation and energy prices, and increased spending on home improvement shows indicators of recovery for the sector.

Consumer confidence meanwhile has taken a knock as consumers also started to feel the impact of rising household bills, such as broadband and council tax.

Some comfort is being taken from the latest inflation figures, with six in 10 (62 per cent) saying the slowdown has made them more able to live within their means, and a similar proportion (56 per cent) feel more confident in their household finances. Meanwhile, confidence in the strength of the UK housing market rose slightly last month from 25 per cent to 27 per cent.

Despite increased housing costs when compared to 2023 figures, the month-on-month difference was marginal (-0.01 per cent), indicating that consumers may not be feeling worse off in the short term, particularly in light of the decrease in the Ofgem energy price cap in April which led to consumer spending on utilities falling -12.5 per cent in May.

Getting on the property ladder is seen as a major milestone for many consumers, with a tenth (10 per cent) of people who have never owned a property saying they feel under societal pressure to be a homeowner. Three in 10 (30 per cent) cite the cost of a deposit as the biggest barrier to buying a home, whilst 18 per cent say they are delaying entering the property market due to high interest rates.

Some are choosing to forgo homeownership altogether, with one in seven renters (15 per cent) saying they prefer the flexibility it provides them. For others, housing is no longer an enticing investment, as 12 per cent say they prefer renting due to low confidence in the strength of the UK housing market.

Looking at the ”bank of mum and dad”, the older generation received less help from parents to buy their first home – 10 per cent of over 55s say they received financial support, compared to 19 per cent of 18-34-year-olds.

For those who have purchased property, motives were varied – 30 per cent bought a home because it was cheaper than renting in the long term, whereas 24 per cent said they got on the property ladder because it was a good investment.

While the retail sector continues to struggle, consumer spending on home improvement showed signs of recovery last month. Furniture stores, though still in decline, saw their smallest decrease (-2.3 per cent) since last August, while home improvement and DIY stores (-5.4 per cent) had their best performance since last September, likely boosted by homeowners capitalising on the early May bank holiday to spruce up their living spaces.

Mark Arnold, Head of Savings and Mortgages at Barclays said “Our latest spending figures show that rent and mortgage payments are still posing a challenge for consumers. However there are encouraging signs of improvement ahead, with falling inflation and interest rate cuts in Europe giving hope that the Bank of England will follow suit in the coming months.

“Many lenders are finding creative solutions to the problems faced by first-time buyers. Products like Barclays’ Springboard mortgage or Kensington Mortgages’ flexible lending criteria help to overcome some of the barriers and make homeownership more feasible.”