Economy: Gloom subsides as families more upbeat

Families are more upbeat about their finances following an increase in house prices, according to a new report. Picture: PA
Families are more upbeat about their finances following an increase in house prices, according to a new report. Picture: PA
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FAMILIES are more optimistic that they have been in almost five years over signs that house prices are increasing, a report has found.

Just over one quarter (26 per cent) of people said remaining within the family budget had been more difficult in July, while nearly one in ten (9 per cent) saw an improvement, according to financial information company Markit.

An overall reading of 41.5 for this month indicated the strongest household sentiment seen since the survey started in February 2009.

Readings above 50 indicate that families’ finances are improving and those below this level show a deterioration. While the overall reading is still a negative one, improvements have been recorded in four out of the last five months, Markit said.

The findings come at a time when inflation has surged to a 14-month high, intensifying the pressure on households. However, signs of blossoming confidence among home owners and rising incomes from employment have helped to create a “brightening picture”, the report said.

Around 27 per cent of people believe their finances will improve over the next 12 months, while 37 per cent expect worse to come, showing the least negative outlook since March 2010.

Sentiment among mortgage holders improved to a new high, while people living in the private rental sector were the least downbeat of all the housing categories. House prices have seen stronger than expected increases this year, following the introduction of various government schemes which have made mortgages much more accessible.

Private sector workers were generally optimistic that their finances were improving and reported the most marked rise in income levels since the survey started, while public sector workers were still downbeat.

Tim Moore, senior economist at Markit and author of the report, said: “Signs of a sustained recovery across the UK economy and a corresponding upturn in labour market conditions were key factors in alleviating strains on consumer budgets.

“While higher property values may have supported household finance sentiment among home owners, there was evidence to suggest that this summer’s brightening picture is not solely a reflection of rising prices for bricks and mortar.

“Increased income from employment during July, alongside a much less downbeat assessment of financial wellbeing among people in the private rental sector, highlighted a broad change of momentum.”

Some 1,500 people were interviewed about their finances for the study across Britain.

Meanwhile, a separate survey from Lloyds TSB showed consumer sentiment reaching a new high of 112 points in June.

The figure was the highest since the survey began in November 2010