Brits finally cut back spending as credit crisis hits home

17 April 2008 / by Rachael Stiles
Having previously continued to spend, spend, spend, despite warnings about the economy, it would seem that the British public are now realising what credit crunch could mean for them.

According to a 2008 British Lifestyles report by research group MINTEL, 57 per cent of British adults are now cancelling various spending plans because the future of their personal financial situation has become uncertain.

Brits are cutting back on a variety of luxuries and unnecessary expenditures, such as the 20 per cent that have cancelled or delayed a holiday, 16 per cent who have not carried out home improvements which they had previously intended to do, and the11 per cent which has decided not to increase the amount they pay into savings accounts.

The most common reason cited by Brits for reigning in their spending is the cost of day-to-day living, with almost half having cancelled their plans for this reason; 17 per cent have been affected by unforeseen household bills and the same percentage said that they simply feel the need to be more careful in the current financial climate.

Rising house prices, energy costs, food prices, and more expensive fuel at the pumps will all have combined to take a toll on household finances and are stretching people's budgets.

Additionally, people may be facing additional expenses which they do not even recognise, for example, income tax and National Insurance, which take a greater proportion of income than they 10 years ago, having increased from 14.6 per cent in 1997 to 17.8 per cent in 2008.

"People are clearly starting to get a sense that things are not as easy financially as they once were," comments Peter Ayton, chief statistician at MINTEL. "In light of the credit crunch, borrowing has now become harder and we are likely to see even more people having to make sacrifices when it comes to their spending in the future."

A quarter of household income is now absorbed by mortgage repayments, up from 14 per cent 10 years ago. "Despite the unprecedented growth in house prices over the last decade, the housing boom is now well and truly over" continued Mr Ayton. "Credit will now be increasingly hard to come by and the mortgage to income ratio will come down with a bump to more realistic levels".

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