Consumer Confidence Lifts Demand for Financing

Economic cycles track a number of important financial indicators, but there are other factors at play influencing monetary trends. In addition to hard data reflecting the state of economic affairs, perceptions and opinions also have substantial impacts on the way financial markets carry-on. Public confidence levels, for example, drive the way consumers handle their money, which can lead to noticeable developments in financial industries. Today, confidence is high, so people are shopping for mortgages and other loans more than was evident during the recent economic slowdown.

Is higher public confidence a sure sign of sustained economic recovery? To say so may be overstating the lasting effects of current trends, but strength in consumer lending markets is definitely a good sign for prolonged prosperity.

Positive Perception Fuels Mortgage Market

According to research conducted by the polling organisation Gfk, consumers’ economic confidence currently stands at a thirteen-year high. Confidence has risen steadily since bottoming-out during the depth of the recent recession, in 2008. The current data illustrates positive perceptions about personal finances, indicating people are more likely to make major purchases than they have been for quite some time. In fact, a majority of those participating in the poll believe their own personal finances will improve over the course of the next twelve months. As a result, the lending industry is logging gains. Some specific factors driving renewed confidence include the following economic influences:

Low Inflation – For a long time, UK residents have grappled with low interest rates and inflation. For years, investors have had a hard time finding positive gains, due to the fact available interest rates were unable to keep pace with inflation. For the first time in recent memory, inflation stands at zero per cent, opening the door for better investment performance. Inflation is measured using a set of metrics taking samples from various segments of the economy, so zero per cent inflation doesn’t necessarily mean prices are at a standstill across the board. What low inflation does do, however, is contribute to positive feelings among consumers and stimulate spending within the overall economy.

Job Market Gains – Following the recent period of recession, the employment market has made reasonable gains. As better jobs become available and people feel more confident with employment security, they make long-term plans, which include financing for major buys. Mortgages, for example are being sought in greater numbers, as families find firm financial footing and foster hope for the future.

Increased Spending Power – As a result of slowed inflation, consumers are feeling their money stretch further for everyday purchases. But spending is also seeing a lift tied to lower energy prices. As competition and cheaper raw materials push energy contracts downward, consumers are more comfortable taking loans and mortgages.

Low Base Rate – Lending rates are tied to the Bank of England base rate, which remains low. In fact, interest rate increases have been push down the road, so loans are still available at highly competitive rates. Qualifying for the most attractive terms requires strong credit references and solid earnings to debt ratio, but even those with imperfect credit have access to various forms of financing. Well-qualified buyers seeking financing for a 90% loan to value mortgage are still funding home buys for under4% interest.


It is often difficult to isolate exactly what drives consumer spending, but several factors are supporting strong lending industry trends. In addition to low inflation and steady interest rates, housing prices have grown moderately, furnishing affordable housing for those in the market to buy. And as energy costs remain low and the job market shows stability, confidence is also growing. With a strong outlook for coming months and some time remaining before the Bank of England moves the base rate higher, observers expect positive lending trends to continue.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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