KBRA UK Releases Research ? UK Consumer Crunch: Challenging Times Ahead
KBRA UK (KBRA) releases research that focuses on the UK consumer and the challenging environment borrowers face amid rising costs. UK consumers and borrowers are about to face a crunch as inflation and interest rates impact their spending power and increase the risk of higher delinquencies and defaults on outstanding debt obligations.
Key to maintaining support for these borrowers is the low levels of unemployment, as well as accumulated savings and pay growth seen over the pandemic period. Confidence has decreased amongst consumers and there has been plenty of warning as bills will continue to rise over the next several months. It will be important to monitor metrics such as a rise in credit card securitisation delinquencies and higher unemployment. While the coming winter will be a test for consumers as rising energy prices and stubborn inflation will stress consumer budgets in the UK and abroad, most are in a much better financial position than in previous crises.
Key Takeaways
- Consumer confidence hits historic low as the outlook for costs and employment sours sentiment.
- Inflation to hit consumers hard with 10.1% price increases and negative real pay growth; energy prices set to be the biggest driver.
- Energy prices are key to rising costs for individuals from home energy bills to businesses passing on energy cost increases to consumers where possible.
- Bank rate increases to further pinch borrowers as the cost of monthly mortgage payments moves higher. Those on fixed rates that are rolling off could see substantial increases in their monthly payments.
- High savings over the pandemic lockdowns, nominal pay rises over the past two years, and low unemployment continue to support consumers, for now.
Click here to view the report.
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About KBRA
KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.
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