Britons enter the five-week election campaign more upbeat about the economy than at any time in almost 13 years, according to the latest snapshot of confidence from the polling organisation Gfk.
Against a backdrop of falling inflation and a boost to spending power from plunging energy prices, Gfk said all five of its measures of consumer confidence had picked up in the past month.
The people polled said they were more positive about their own personal finances and the state of the economy than they were in February, with more prepared to make a major purchase.
Despite David Cameron’s hopes that rising living standards would translate into a boost for the Conservatives, opinion polls have so far not detected any real change in voting intentions. Even so, Nick Moon, Gfk’s managing director of social research, said the report should be good news for the prime minister following the official launch of the election campaign on Monday. “At +4, the index is the highest it has been for almost 13 years, and it has gone up a striking eight points in just three months,” he said.
“Reaction to the budget has thus far been muted, but if people warm to it over the next few weeks, then we may well see a further increase in the index next month. A consistently rising index in the runup to the election is likely to be good news for the government.”
Gfk’s records of consumer confidence show that in the past 40 years there has been a tendency for more respondents to be pessimistic than optimistic. However, consumer confidence has gradually been rising since hitting a trough of almost -40 percentage points during the worst of the recession in 2008. The flatlining of the economy in 2011 and 2012 meant that by early 2013, consumer confidence was still at -30 points, but the subsequent pickup in activity brightened the mood.
The survey showed that it has taken time for falling unemployment and lower oil prices to show up in the views of consumers about their own finances, with a balance of -2 points saying their situation had improved over the past year. This was a slight improvement on the -3 points recorded in February. But a majority of consumers (+7 points) believe their personal finances will improve over the next 12 months, and there is also an expectation (+6 points) that the economy will thrive.
Signs from the Bank of England that the date of the first increase in interest rates has been pushed back is thought to be one additional factor boosting confidence among those paying a mortgage. Data released by Threadneedle Street on Monday showed that demand for mortgages was at its strongest level in six months in February amid evidence of a price war among lenders. The average cost of a two-year fixed-rate mortgage for a borrower with a 25% deposit fell below 2% for the first time ever, the Bank’s data showed, while five-year fixed-rates edged close to 3%.
During February, 61,760 mortgages were approved for house purchases, compared with an average of 60,750 over the previous six months, the Bank said. Despite the improvement in recent months, demand for home loans is almost 20% below its recent peak in January 2014. Mortgage brokers said fierce competition between lenders was increasing the options for borrowers, as well as pushing interest rates down to record lows.
Borrowers taking out mortgages with smaller deposits have also seen price cuts in recent months, with the average rate for a 95% home loan falling to 4.67% in February, although at 90% loan-to-value the average rate edged up slightly to 3.77%.
Brian Murphy, head of lending at the Mortgage Advice Bureau brokers, said the data showed that momentum was returning to the mortgage market. “The combination of low inflation, moderating house price growth and a delay in the base rate rise seems to be working in consumers’ favour,” he said.
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