UK's consumer confidence hits new low

The impact of five interest rate hikes in a year in the UK was blamed today for figures showing British consumer confidence at its lowest level since the Iraq war.

Reports of falling house prices in the UK and the prospect of another rate hike this year has also made people more nervous about their financial situation, according to market research group GfK Martin Hamblin.

The group, which questioned people on a range of financial issues, said respondents were particularly unsure about their household finances and making major purchases.

The monthly consumer confidence barometer stood at minus seven – down from minus five in August – bringing it to its lowest level since March 2003.

Earlier today the Bank of England said that mortgage lending had slowed to its lowest level for a year during August, suggesting consumers were finally becoming wary about taking on more mortgage debt.

GfK Martin Hamblin director Grant Montague said: “It seems highly likely that it is the reports of falling house prices, the impact of interest rate rises and the anticipation of another interest rate rise before the end of the year which are the factors influencing this month’s decline in consumer confidence.”

The number of people who think now is a good time for major purchases fell to its lowest level since the end of 1999.

The index measuring confidence about personal finances also fell to minus three from plus one, while perceptions about the general economic situation dropped to minus 26 from minus 24.

Respondents were given a series of questions on the economy and their personal finances. Their answers from five options range from plus one for the most positive, down to minus one for the most negative.

GfK, which carries out the study on behalf of the European Commission, takes the mean score for each question in order to calculate the headline figure.