Brits feeling more confident about their finances

Falling interest rates are helping people in the UK feel better about their finances.

Earlier this month, the Bank of England cut interest rates by a quarter of a percentage point to 4%.

That was the fifth rate reduction since August last year and the lowest they've been for over two years.

And it seems these changes have had an effect.

According to GfK’s latest Consumer Confidence Index, Brits are feeling better about their finances both now and for the year ahead. 

The index score rose two points in August to -17, the strongest reading since last December.

Brits in ‘wait-and-see mode’

While the numbers look promising, the research also shows that many consumers are still cautious about what might happen next.

As Neil Bellamy, GfK’s consumer insights director, explains: “The improved sentiment on personal finances is welcome.

“But there are many clouds on the horizon in the form of inflation and rising unemployment.” 

“There’s no shortage of speculation, too, about what the autumn budget will bring in terms of tax rises.”

As a result, he believes that many households are in “wait-and-see mode”, meaning that any surprise economic changes could quickly hit confidence.

Inflation at 18-month high

Just this week, the Office for National Statistics confirmed that inflation rose to 3.8% in July.

That’s up from 3.6% in June and the highest level since January 2024.

This was fuelled partly by increases in air fares, as well as food prices continuing to go up.

In fact, food inflation has risen for four consecutive months and now stands at 4.9% - up from 4.5% in June.

So many people could start realising that their money isn’t going as far as it once did, which makes it harder to create a budget and save.