Consumers are more concerned about interest rates than at any time since November 2004, according to the Consumer Barometer published by Lloyds TSB Corporate Markets.
According to responses from the survey of more than 2,000 people, some 80% expect interest rates to be higher this time next year than currently. Just 4% expect see rates falling over the coming year.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, says recent rate rises have dampened confidence, with consumers “expecting the gloom to continue well into 2007.”
Williams adds, however, the findings contradict what most economists see as a topping out of rates, possibly during the first quarter of next year. Also, despite fears of rising rates, there does not yet seem to be any effect on the desire to acquire residential property, despite the previous rate increases.
One driver of the consumer view may be anecdotal evidence of price inflation being felt. Some 62% of the survey group feel prices have risen in the past year, with 79% expecting prices to rise further in the next 12 months. This is fuelling expectations of rising rates, Lloyds TSB says.
Additionally to fears on interest rates, fears of joblessness have also gained, meaning more workers feel their jobs are less secure than they were a year ago. However, Lloyds TSB points out November unemployment figures suggest the month saw the steepest decline since January 2005, suggesting confidence in employment will pick up in coming months.
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