The Collapse Of Consumer Confidence
Is the economy really going down the tubes? And if so, what can we all do to save ourselves?
There's increased evidence of an economic downturn - and consumer confidence seems to be suffering as a result. But as Corporal Jones put it - don't panic! There's plenty you can do to protect yourself.
Panic stations?
New FSA figures indicate that one in five mortgage holders are concerned about meeting their repayments in the next year.
And of those, 24% have no contingency plans to help meet the costs.
In fact, the FSA is taking the situation so seriously it's launching a £2 million advertising campaign to help consumers when their fixed rate or discount deals come to an end this year.
The campaign is intended to help people make `informed financial decisions' and find the right mortgage deal for them.
Meanwhile, recent research from Abbey suggests that two-thirds of today's first time buyers are now delaying buying a home (compared with the number considering it at the beginning of 2008).
Some 69% of those questioned feared that house prices will fall, whilst 67% feel that their finances are already too stretched.
And to top it all off, Nationwide's Consumer Confidence Index, fell to a new low in February.
Getting a grip
But before we all run around like headless chickens, let's look at each of the above statements a bit more carefully.
FSA figures: Just 573 mortgage holders took part in the survey. So that `one in five' actually boils down to 109 people.
Furthermore, 24% of this number leaves us with just 26 people with no plans to meet their mortgage costs over the next 12 months. This is obviously concerning, but it is not a huge sample of the population.
Certainly, the FSA's campaign to help consumers to make `informed financial decisions' is a step in the right direction - but why did the regulator wait until homeowners are under such pressure?
Here at the Fool we've been providing this sort of help for years.
Abbey research: So according to Abbey's research, two-thirds of today's first time buyers are delaying buying a home. But is this actually bad news?
Many people may feel that when it comes to the property market, the `will it - won't it - crash?' question has been done to death. No one knows for sure what's going to happen - and conflicting data about property prices seems to be produced almost every day.
With all this going on, wouldn't it be more worrying if first time buyers seemed blissfully unaware of the potential problems?
Nationwide's index: So, consumer confidence hit a new low in February. But before we all move out of the country, it's worth bearing in mind that the NCCI index was first published in May 2004.
So although confidence is at its lowest since the record began, this particular record hasn't been around very long.
This doesn't mean it is invalid data - it just means it doesn't include periods of earlier economic difficulty, when confidence was probably a whole lot lower.
And finally: There's always the risk that to some extent, it's those scary headlines that are affecting people's confidence.
Hear the words `housing crash' and `recession' enough times and we begin to believe it's all just round the corner - even if we still have the same amount of money in our pocket.
What you can do
There certainly evidence to suggest that many of us may need to curb our spending and start saving more in the coming months. Rising food prices are one very tangible example of this.
And data provided by the industry can be useful, informative and even illuminating.
But I think it's important this information is handled in a responsible manner. Doom and gloom headlines sell papers, but they also scare the life out of people.
Facing your financial demons is something you can do - right away - to protect yourself. For example, if you're a potential buyer, look into what you can do to improve your financial situation. Or if you're in a lot of debt, start snowballing them today!
That way, if the worst happens, you'll be in the best possible position to weather the storm. And if all the gloomy predictions don't come true, you'll be ahead of the game. Good luck!
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