UK Consumers Taking Steps to Deal with Rising Mortgage Costs – Report

A report has looked into how consumers are managing higher mortgage rates and adapting their spending due to inflation. This along with other key insights are shared in the KPMG UK’s latest Consumer Pulse research.

KPMG’s Consumer Pulse survey “tracks how over 3000 consumers across age and income groups and UK regions say they are responding to the cost of living crisis.”

The 3015 consumers polled in September “by One Poll for KPMG included 37% with a mortgage, 34% homeowners but mortgage free, 22% renters, and 7% living with family.”

Higher mortgage rates:

Faced with either “the immediate reality or prospect of higher mortgage rates, 1096 mortgage holders were asked whether they have either already taken, or are considering taking,” the following actions:

  • Used savings to reduce outstanding mortgage balance: 18% have, 25% considering.
  • Switched to an interest only mortgage: 16% have, 24% considering.
  • Lengthened mortgage term: 12% have, 25% considering.
  • Sold and moved to a cheaper home: 8% have, 22% considering.
  • In addition, 11% said they have reduced pension contribution, with 20% considering doing so.

Responding to the findings, Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for 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 percent 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. Inevitably, increased household budget and savings being used to pay the mortgage, or higher rent cost, will continue to lead to less money being spent elsewhere within the economy by consumers, which will continue to challenge both retailers, brands and leisure businesses.”

Non-essential spending:

With various household essential costs remaining elevated, over half (56%) of the consumers surveyed said that they “have had to reduce their non-essential spending since 2023 began.”

Only 4% said they have “been able to increase non-essential spending this year.”

Eating Out (70%), Takeaways (60%) and Clothing (60%) are the top three things “that people reducing their non-essential spend have cut back on so far in 2023.”

Shopping cost cutting:

Consumers are also continuing to “change their buying behavior to make further savings, with even more having to squeeze out value” since this time last year:

  • 41% say they are buying more own brand / value products (30% September 2022).
  • 39% say they are buying more promotional or discount items (32% September 2022).
  • 36% say they are spending more time looking for bargains (27% September 2022).
  • A third of consumers (29%) said that they have switched to shopping at less expensive retailers, while one in five said they are buying more pre-owned items this year.

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