Consumers more cautious of 'deal switching'

British consumers are becoming more financially cautious in the face of rising interest rates, with fewer people switching to get a better deal, research showed today.

Sean Gardner, chief executive of MoneyExpert.com, said: “The financial squeeze caused by higher interest rates has meant consumers are more inclined to stick with what they know and, in any case, providers are getting tougher.

“The reality is that consumers are battening down the hatches in preparation for a rough ride as the mortgage becomes more expensive and disposable income reduces.

“It seems we’re all taking stock of our finances, and perhaps switching is an unwelcome distraction in the current climate.”

An estimated 5.4 million fewer people changed provider for a range of household and financial services during the first half of the year compared with the previous six months, according to financial website MoneyExpert.com.

The group attributed the fall in the number of people switching to consumers becoming more financially cautious when money is tight.

It added that many providers are also “getting tougher” and withdrawing better deals.

Credit card and mobile phone companies were the worst hit, with around 900,000 fewer people changing credit cards and 1.4 million fewer changing their mobile phone provider than during the previous six months.

There was also a big drop in the number of people remortgaging as recent interest rate rises pushed up the cost of borrowing.

Overall, only 3% of people changed their home loan provider during the period, nearly 500,000 fewer than in the previous six months.

The only area that saw an increase in the number of people switching was broadband services, with 11% of consumers switching to get a better deal, around 4,000 more than during the second half of 2006.

But the group said savers appeared to be slow to respond to higher interest rates, with only 5% of people moving to a better deal during the fist half of the year – around 3,800 fewer than during the previous six months, despite higher interest rates meaning they should be able to get more competitive deals.

:: YouGov questioned 2,169 people during July.