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Tackling debts climbs the agenda

Thursday 17 January 2013 20:00

Just as the autumn budget saw the government renew its commitment to debt reduction, so consumers in the coming months have placed debt repayment as a key priority.

Fewer people intend to save, invest, or borrow but there is a big rise in people intending repaying debt, to the highest since December 2010.

And the North East is among the most financially active regions, according to the latest data.

The first quarter 2013 GfK / JGFR UK Financial Activity Barometer recorded a drop in consumers intending saving, investment and borrowing activity in the next six months, down from a two-year high in September.

Activity varies considerably between regions with the North East and South West hosting the most financially active populations (undertaking two or more savings, investment or borrowing activities) in prospect.

All the first quarter measures are more optimistic than a year ago when the headline measure was at a decade low.

The GfK / JGFR Financial Activity Barometer (based on a two-quarter moving average) gained 2 points to 92.3, its best level in two years suggesting better activity levels in prospect compared to a year ago.

More people are intending repaying debt rather than saving, with cash deposit intentions at a decade low in the wake of miserly deposit rates. Many people appear to be repaying short term debt taken out to pay for the festive season.

The good news for pension providers and advisers this quarter is of a bounce back in regular intended pension contributions from a decade- low in September. The overall JGFR Life & Pension Index is down slightly on the quarter and little changed on the year.

In September there was a surge in intended investment activity – both buying and selling equities and bonds directly or through collective funds. The latest investor sentiment data shows weaker demand in prospect and much less intended selling.

Overall the proportion of intending investors (14%) is down from 19% on the quarter but up from 10% a year ago.

Expected housing market activity saw sharp improvements in both mortgage and property purchase intentions in September but a weak outlook for London.

Despite some weakening in the current FAB in both indicators, the 2-quarter JGFR Housing Confidence Index is at its strongest since June 2010 suggesting a continuation of the improved activity levels predicted in September and now being reflected in actual housing market data.

Cash buyers, as in September, make up around a third of prospective buyers. There is little evidence of any pick up in first time buyer demand, unless supported with family finance. Housing market confidence among Londoners is sharply higher.

Net credit usage is set to be much weaker in the coming months despite the Funding for Lending scheme designed to increase consumer and small business borrowing.

Demand for consumer credit has fallen back – with just 9% of adults expecting to use consumer credit in the coming months, compared to 12% in September.

Despite the quarterly decline, the headline two-quarter GfK JGFR Consumer Credit Index edged 1 point higher to 70.0, its best in three years.

John Gilbert, chief executive of JGFR says: “The widespread negative media reaction to the autumn statement has had a notable impact on confidence and activity. The more positive mood of consumers this autumn has seen some pick up in house purchase approvals and new car registrations.

“Investors have been more active as stock markets have steadily improved. In the coming months while expected activity is up on a year ago, consumers have turned more cautious, and placed debt repayment as a priority, which points to financial services business volumes likely to slow in the first half of 2013.”