The Q2 JGFR/GfK Financial Activity Barometer points to strong business volumes across most areas of retail financial services. Rising confidence and improving household finances are behind the positive outlook, which began last September.
77% of adults intend to save, invest, borrow or repay debt, down slightly on the 78% in Q1 but well up on 69% in Q1 2013. The headline JGFR / GfK FAB Index stands at 98.0, little changed on Q1, but 8 points higher than in Q2 2013.
Strong savings, investment and pension contribution intentions
Despite the negative returns (after inflation) on many savings accounts, intending flows into cash deposits. ISAs, regular savings and Junior ISAs/ Child trust Funds are at multi –year highs. Many young people will be saving for a property deposit to take advantage of the Government’s Help-to-Buy scheme.
Investment intentions improved on the Q1 figure; 15% of adults intend to invest directly or through collective funds compared to 13% in Q1 and 12% a year ago.
Recent negative events on life and pension provider prospects came too late for consumers to consider; the message about pensions seems to be getting through, with above average product intentions, particularly on making regular pension contributions. The JGFR/GfK Life & Pension Index (95.7) is at its highest since September 2006.
Overall 68% of adults intend to save, invest, or pay into a life company, unchanged on Q1, but well above 58% a year ago.
Borrowing intentions at multi-year high
As the Financial Conduct Authority (FCA) takes over the regulation of consumer credit, it does so with record survey usage intentions for credit card and overdraft borrowings and a near 5-year high for car finance plan intentions.
Mortgage intentions continue to climb with intentions at the highest since June 2009. The JGFR Mortgage Intentions Index gained 6 points to 65.2, and is up nearly 20 points compared to Q1/Q2 2013.
As occurred in spring 2009 the surge in demand for mortgages may be unfulfilled as new mortgage regulations look set to slow down the application process and the number of mortgages demanded is at a level almost double the current level of approvals.
Overall housing market confidence, including property purchase intentions, is up 6 points to 80.2, the best measure since Q1/Q2 2008.
Regionally, housing market intentions in London far exceed elsewhere in the UK pointing to much stronger house price growth in the capital.
Debt repayment still a priority
While borrowing intentions are at a multi-year high, debt repayment intentions also are at above average levels. The JGFR Debt Repayment Intentions Index is little changed on the quarter at 100.2, but is up 14 points on the year. Nearly 3 out of 10 adults intend to repay debt
Commented John Gilbert, Chief executive of JGFR:
“Strong financial activity in prospect reflects the remarkable shifts in household finances in the past 9 months. Government policy to boost the housing market has had knock on effects on savings intentions as more people save for a deposit, as well as stimulating spending in the household goods sector. Nudging people into pension contributions would seem to be working.
Where there is some concern is in the surge in demand for overdrafts and credit card borrowing. While the majority of households are much better off financially than a year ago, the small minority in debt has grown and would appear under rising financial pressure.”