Consumer confidence takes a hit due to credit conditions
December 24, 2007
A recent report has shown how consumer confidence in the UK has taken a hit over recent weeks due to the difficult credit conditions and turmoil in the financial markets. The effects of the credit crunch that has wreaked havoc in the UK since August has taken its toll on consumers, and confidence has plummeted in the run up to Christmas, which may have partly prompted the Bank of England to lower interest rates earlier this month from 5.75% to 5.5%.
An economist from the Nationwide stated: “Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation.” According to the Nationwide Building Society its consumer confidence index fell from 90 in October to 86 for November. The consumer confidence index was set up in 2004, and so far this has been the largest drop on consumer confidence since the index began.
Many homeowners are struggling to keep up with mortgage repayments due to a series of five interest rate rises since August 2006. Earlier this month the Bank of England cut interest rates by a quarter point, but after a total 1.25% rise since August 2006 this has not made much of an impact on consumer confidence or affordability. The effects of the credit crunch have also impacted upon confidence levels, with consumers having to cope with higher repayments and increased difficulties in getting affordable finance. On top of this, energy firms are said to be increasing energy usage costs in the New Year, which means that consumers will also have to face higher energy usage bills.
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