Consumers expected savings/investment activity is at its highest in two years. This is the main finding from the 27th Financial Activity Survey commissioned by financial research specialist JGFR from GfK NOP*.
This increased financial engagement comes despite the enormous volatility and uncertainty surrounding markets and institutions. Trust and confidence, the necessary attributes consumers need to have in financial services products and institutions are still in evidence.
The headline FAB Activity Index** rose to 94.6 from 93.0 in June, its highest level since Q3/Q4 2006 (99.7). Greater intended cash savings and life/pensions activity are behind the rise. The FAB Savings & Investment Activity Index climbed back above 100 (100.4) for the first time in two years and compares to 97.6 a year ago.
More people need to save for property deposits and for their pension
With people having to save more by way of deposit for property purchase and the realisation that property cannot be relied on solely for pension purposes more people expect to save in cash deposits or contribute to lump sum schemes in the coming months.
High volatility in stock and bond markets has reduced the numbers of active investors with the gap between intending buyers and sellers narrowing. Overall equity investment sentiment is at its weakest since Q2/Q3 2003.
Borrowing demand generally weak
With financial well-being at near record lows as a result of squeezed household incomes and rising job worries, borrowing intentions remain at close to survey lows. The FAB Borrowing Index fell to 71.6 from 73.1 in June and is little changed on a year ago. Personal Loan demand fell to its lowest ever. Borrowing intentions by credit card and overdraft pushed the overall FAB Consumer Credit Index to its highest (76.9) since Q1/Q2 2007.
No sign of pick up in housing market confidence
Housing market confidence is at a new low. Fewer people expect to put down a deposit on a property to buy – the FAB Property Purchase Intentions Index falling to 69.6, down from 81.8 in June and 94.6 a year ago. The FAB Mortgage Intentions Index (67.1) fell close to its all time low (66.7) with demand constrained by much reduced supply.
Little change in dominance of ten leading brands as Main Financial Services Providers
Despite the wind of great change buffeting the big high street banks, their share as main financial services providers (MFSPs) remains little changed on previous quarters (85%). A rearrangement of the pecking order will take place in the coming months following takeovers / mergers. With 10% of adults willing to change to a major supermarket brand should a current account be launched the main financial services provider market may be ripe for a shake-up.
Where MFSPs have lost their way in recent years is in loosing their status as a main financial adviser. Their market share has fallen away from 28% in 2003 to 4% in 2008. More people are turning to Financial DIY*** brought on by ‘24x7’ broadband internet access (59% of adults have broadband internet access) with the proportion of non-advised adults reaching some 25 million.
Commented John Gilbert on the survey results:
“ Consumers have shown great fortitude and resilience in the face of enormous uncertainty and change in the financial world. The latest activity survey reflects the shifting priorities of consumers in line with a new, more austere economic climate. For retail financial providers’ savings, pensions and insurance businesses the coming months should see encouraging new business volumes. Lending volumes however will remain subdued”
*The Financial Activity Survey uses the same GfK NOP telebus of 2,000 adults aged 16+ , representative of the UK population as used for the UK Consumer Confidence Barometer produced for The European Commission. Respondents are asked about their intended financial activity across 18 categories of savings, investment and borrowing in the next 6 months. Interviewing took place among 2,007 adults aged 16+ between September 5th -14th.
** Based on a 2-quarter moving average Q3/Q4 2002=100
*** A full ComPeer-JGFR report (Financial DIY 2008/9) on the market for financial advice and the growth and strategic implications of the unadvised market will be available in November.
The Autumn UK Financial Activity Bulletin is published in electronic format on October 14th. The bulletin provides a clear and detailed analysis of the mood and financial activities of the consumer across various socio-demographic segments and regions and their main financial provider relationships.
To discuss the Financial Activity Survey and our reports please contact John Gilbert
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