13 August 2007
UK homeowners remain confident about the state of their finances, despite recent interest rate rises; however economists have warned that this feeling may not last for too mush longer.
A report by the BBC has found that, despite recent interest rate rises, increasing house prices and ever-increasing levels of personal debt, the UK population remains confident about the state of their finances.
Five interest rate rises since last August have done very little to dampen consumer spending, the opposite effect to the mid-1990s when cuts in interest rates failed to curb the increase of spending on the British high street, the BBC notes.
Speaking to the BBC, Richard Jeffrey from Ingenious Securities explained that many people are still feeling confidence in their levels of spending.
"For the majority of people in the economy there is still a bit of a feel-good factor, although that may be starting to diminish," he said.
"For many of those people, the feel-good factor is a bit unrealistic at the moment and would probably be reduced without further action on interest rates."
Indeed, Nationwide's consumer confidence measure for July showed an increase in consumer confidence despite the terrorist attacks that month and increased interest rates.
However, Fionnuala Earley, Chief Economist at Nationwide has warned that this feeling may not last for too much longer as the effects of the recent base rate rises start to be felt by the average homeowner.
"We have to be a little bit careful with surveys of slightly fuzzy things like consumer confidence because it could be reflecting that things aren't as bad as they thought they might have been," she said.
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