UK consumers taking steps to meet higher mortgage costs

KPMG UK’s latest Consumer Pulse research released

KPMG UK’s latest Consumer Pulse research released

Article Posted date 28 September 2023
7 min read

How consumers are managing higher mortgage rates and adapting their spending due to inflation are among the insights in KPMG UK’s latest Consumer Pulse research.

KPMG’s Consumer Pulse survey tracks how over 3000 consumers across age and income groups and UK regions say they are responding to the cost of living crisis.  The 3015 consumers polled in September by One Poll for KPMG included 37% with a mortgage, 34% homeowners but mortgage free, 22% renters, and 7% living with family.

Higher mortgage rates:

Faced with either the immediate reality or prospect of higher mortgage rates, 1096 mortgage holders were asked whether they have either already taken, or are considering taking, the following actions:

  • Used savings to reduce outstanding mortgage balance: 18% have, 25% considering.
  • Switched to an interest only mortgage: 16% have, 24% considering.
  • Lengthened mortgage term: 12% have, 25% considering.
  • Sold and moved to a cheaper home: 8% have, 22% considering.

In addition, 11% said they have reduced pension contribution, with 20% considering doing so.

Responding to the findings, Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for KPMG, said:

“Whether it’s switching to interest-only mortgages, lengthening mortgage terms, reducing pension contributions, or selling property to move to something cheaper – this higher interest rate environment is causing between 10 to 20 percent of mortgage holders that KPMG surveyed to take significant steps to manage these higher costs.  And up to a further quarter of people surveyed are also considering taking such measures, likely only waiting for when their fixed-term deal ends.

“Inevitably, increased household budget and savings being used to pay the mortgage, or higher rent cost, will continue to lead to less money being spent elsewhere within the economy by consumers, which will continue to challenge both retailers, brands and leisure businesses.”

Non-essential spending:

With various household essential costs remaining elevated, over half (56%) of the consumers surveyed said that they have had to reduce their non-essential spending since 2023 began.  Only 4% said they have been able to increase non-essential spending this year.

Eating Out (70%), Takeaways (60%) and Clothing (60%) are the top three things that people reducing their non-essential spend have cut back on so far in 2023.

Shopping cost cutting:

Consumers are also continuing to change their buying behaviour to make further savings, with even more having to squeeze out value since this time last year:

  • 41% say they are buying more own brand / value products (30% September 2022).
  • 39% say they are buying more promotional or discount items (32% September 2022).     
  • 36% say they are spending more time looking for bargains (27% September 2022).           

A third of consumers (29%) said that they have switched to shopping at less expensive retailers, while one in five said they are buying more pre-owned items this year.  

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Linda Ellett
Head of Consumer, Retail & Leisure
KPMG in the UK
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Linda Ellett added:

“As 2023 has progressed we have seen the number of shoppers having to make cost savings increasing.  Around 40 percent of the consumers we survey say they are buying lower cost or promotional goods, with a third having switched to lower cost retailers.  One in five say they are buying more pre-owned goods this year, which more positively could also reflect environmental drivers.

“We are also seeing consistent numbers of consumers cutting back on certain non-essential activities in order to save money – with eating out and takeaways continuing to be the most common target for cost cutting.”

Use of savings:

Just over a quarter (27%) of those polled are presently using their savings to help meet their household essential costs.  70% are not currently having to use savings for this purpose.

The most common ‘big ticket purchase’ that savings have been used on in 2023 is holidaying – for 38% of people with savings. 

The average amount of savings of those polled is just under £8000.  However, 18–24-year-olds reported having £2,747 in saving on average. While those aged 65 and over reported having £12,543.

Financial security:

A fifth (21%) of the 3015 consumers polled said that they feel more financially secure now than they did at the start of 2023.  But over a third (34%) feel less secure.  While the remainder feel no more or less secure than when the year began. 

 

ENDS.

Media contact:

Steven Reilly-Hii, Media Relations Manager, KPMG LLP, E: steven.reilly-hii@kpmg.co.uk , T: 07510 376635.

Full questions and answers:

Consumer Pulse survey questions posed to 3,015 UK consumers (unless stated otherwise) between September 1 to 12 2023, by One Poll, for KPMG UK:

-Do you feel more or less financially secure today, than you did at the beginning of January this year?

  • More: 21%                                         
  • Same: 44%                                         
  • Less: 34%                                            
  • Prefer not to say: 1%

-Since the start of the year, due to the cost of your essential bills (e.g., food, energy, fuel, mortgage/rent), how have you changed your non-essential spending, if at all?

  • I have been able to increase my non-essential spending:                4%
  • My non-essential spending levels remain the same as in 2022:     36%
  • I had to reduce non-essential spending:                                                 56%
  • Not sure:                                                                                                             4%

-For the 1678 people that have reduced spend: What non-essential spend(s) have you cut back on so far this year?

  • 70% - Eating out                                                                                              
  • 60% - Takeaway                                                                                               
  • 60% - Clothing                                                                                                  
  • 44% - Travel/Holiday                                                                                     
  • 44% - Food and drink shopping                                                                 
  • 36% - Home improvements                                                                        
  • 35% - Experiences                                                                                          
  • 32% - Beauty products & services                                                            
  • 27% - Media subscriptions                                                                          
  • 26% - Vehicle/Transport use                                                                      
  • 24% - Technology                                                                                           
  • 16% - Meal delivery kits                                                                                
  • 15% - Fitness                                                                                                    
  • 10% - Children’s clothing & toys                                                                
  • 7% - Pet products                                                                                            

-Since the start of 2023, which, if any, of the following actions are you doing more of when shopping?

  • 41% - buying own brand / value products                             
  • 39% - buying promotional or discount items                                        
  • 36% - spending time looking for bargains                                              
  • 34% - buying fewer items                                                                            
  • 29% - Buying different brands to avoid paying higher cost             
  • 29% - Shopping at less expensive retailers                                           
  • 28% - Shopping at multiple stores to find bargains                            
  • 20% - Buying pre-owned items                                                                 
  • 18% - Cancelling monthly subscriptions                                                 
  • 17% - Signed-up to retailer loyalty schemes                                        
  • 16% - Stocking up on items in case prices rise                     
  • 14% - Reducing cost of monthly subscriptions                                    
  • 13% - Buying wholesale/bulk                                                                     
  • 10% - Spending less on credit                                                                     
  • 8% - Spending on credit                                                                                
  • 6% - Buying sustainable or ethical produce                                          
  • 6% - Buying premium/finest range instead of eating out                
  • 3% - Buying monthly subscriptions                                                          
  • None of the above: 14%

-Approximately how much money do you have in savings at the moment?

  • Average: £7906.

-For the 2913 people with savings: Are you currently having to use your savings to help meet your essential household costs (e.g., food, energy, fuel, mortgage/rent)

  • 27% - Yes                                            
  • 71% - No                                             
  • 2% - Prefer not to say                    

-So far this year, which, if any, of the following ‘big ticket’ purchases have you spent your savings on?

  • 38% - Holiday(s)                                                                              
  • 17% - Home improvements                                                        
  • 13% - Home appliances                                                                
  • 10% - Technology                                                                           
  • 9% - A Vehicle                                                                                  
  • 8% - Home electronics                                                                  
  • 4% - A new home                                                                            
  • None of the above – 9%                                                               
  • Haven’t used savings on big ticket items- 31%                     

-In the rest of 2023, which, if any, of the following ‘big ticket’ purchases do you plan on spending savings?

  • 24% - Holiday
  • 15% - Home improvements
  • 9% - Home appliances
  • 8% - A Vehicle
  • 6% - Technology
  • 6% - Home electronics
  • 5% - A new home
  • None of the above – 12%
  • Don’t plan to use savings on big ticket items- 41%

-Which of the following best describes your mortgage, if applicable?

  • 34% - N/A, I own a property but have no mortgage remaining
  • 22% - N/A, I rent
  • 11% Fixed Rate – ending after 2025
  • 9% Fixed Rate – ending 2025
  • 8% Fixed Rate – ending 2024
  • 7% - N/A, I live with family
  • 6% Variable/Tracker
  • 3% Fixed Rate – ending before end of 2023

-For 1096 mortgage holders: Which, if any, of the following have you done/ are you considering doing due to facing a higher mortgage rate?

-Switched to an interest only mortgage:

  • Have done this: 16%                       
  • Considering doing this: 24%        

-Sold and moved to a cheaper home:

  • Have done this: 8%                         
  • Considering doing this: 22%        

-Used savings to reduce outstanding mortgage balance:

  • Have done this: 18%                       
  • Considering doing this: 25%        

-Lengthened mortgage term:

  • Have done this: 12%                       
  • Considering doing this: 25%        

-Reduced my pension contribution:

  • Have done this: 11%
  • Considering doing this: 20%

-What have been your top considerations when purchasing goods and services so far in 2023? [Select up to three]

  • 76% - Price                                                         
  • 56% - Quality                                                    
  • 25% - Convenience                                        
  • 20% - Loyalty benefits                                   
  • 16% - Sustainability
  • 11% - Customer experience
  • 7% - Ethics
  • 5% - Data privacy
  • 2% - Other considerations
  • N/A – Don’t know/ None in particular – 7%

About KPMG UK:

KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 17,000 partners and staff. The UK firm recorded a revenue of £2.72 billion in the year ended 30 September 2022.  

KPMG is a global organization of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 265,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.