Karim Haji, Global and UK Head of Financial Services at KPMG, comments on the Money and Credit statistical release from the Bank of England.
Karim Haji from KPMG noted that the sharp rise in borrowing suggests that many households “struggled to stretch disposable incomes between Christmas and January pay packets.”
Haji also noted that coupled with the sharp rise in headline inflation “due to rising transport, energy and food prices, as well as annual tax returns, January was a difficult month for many.”
He added that this was reflected in “a drop in consumer confidence, partly driven by concerns about the economic outlook and personal finances moving into 2025.”
He also mentioned that as households “continue to turn to credit to get by, and with rising inflation and more energy price hikes on the horizon, lenders need to be ready to provide the necessary support to those that haven’t had the best financial start to the year.”
Haji pointed out that the dip in mortgage approvals “suggests that affordability remains stretched for many in a higher rate environment, where house prices are elevated compared to average earnings.”
He also stated that high deposit requirements will be “giving potential first-time buyers pause for thought.”
Haji concluded that we may see demand grow as we “approach the stamp duty increase, with first-time buyers rushing deals through before April.”
Earlier, KPMG UK also responded to the announcement from Ofgem that the Energy Price Cap will rise for the third consecutive quarter “to £1,849 from 1st April 2025.”
Responding to the announcement from Ofgem that the Energy Price Cap will rise for the third consecutive quarter to £1,849 from 1st April 2025, Simon Virley CB, Vice Chair and Head of Energy and Natural Resources at KPMG UK, said:
“A particularly cold Winter in Europe, and concerns about low gas storage levels, have put additional pressure on gas prices, meaning that for the third consecutive quarter households in the UK will see their bills going up again. That they are still below the unprecedented highs experienced three years ago will be of little comfort to those who continue to struggle with the cost of living.”
They added:
“Over the long run, it makes sense to reduce our dependency on volatile fossil fuel markets by continuing the shift towards renewables. But that should not preclude action in the nearer term to provide additional support for those vulnerable households who need it most. This could take a number of forms, including social tariffs, or increased support for energy efficiency improvements. Getting the balance right between securing the investment we need to hit the Government’s 2030 Clean Power targets and keeping bills down is going to be a key balancing act over the next few years.”