Credit Crunch

Thanks to Tony for forwarding on this article...

This is an article from yesterday's Daily Telegraph. Its just one of many carrying the same message.

MORTGAGE payments now account for a record £1 in every £4 of take-home pay, forcing households to cut their spending on “big ticket” items such as home improvements and holidays, according to a report.

Almost three in five adults have had to cancel planned purchases because of higher mortgage costs and the rapidly increasing cost of basic necessities such as petrol and groceries, Mintel, the market research company found. Mortgage payments now take up 25 per cent of the average household’s post-tax income — almost double the 14 per cent they absorbed just a decade ago and more than triple the eight per cent peak outlay at the height of the last housing boom in 1991, according to the research.

The study provided the latest illustration of how the credit crisis was hitting families’ finances.

The latest edition of its annual British Lifestyles survey found that one in five households (20 per cent) had delayed a family holiday, while one in six (16 per cent) had deferred home improvements and one in nine (11 per cent) had chosen not to increase their savings.

Financial experts said the survey provided further evidence of a wider slowdown in the economy. One said sales of large “discretionary” household items such as sofas and high-end electronics goods had “virtually fallen off a cliff”.

They blamed falling house prices and the credit crunch for stopping consumer spending in its tracks. Peter Ayton, the chief statistician at Mintel, said: “People are clearly starting to get a sense that things are not as easy financially as they once were.

“In light of the credit crunch, borrowing has now become harder and we are likely to see even more people having to make sacrifices when it comes to their spending in the future.”

Mintel’s report also highlighted that National Insurance contributions now take a 22 per cent bigger slice of the average household’s pre-tax pay than 10 years ago.

Mr Ayton continued: “While people are clearly aware of the rise in house prices, utility bills and the cost of food and petrol individually, many may not have thought about the combined impact these rises have had on their income. But this, along with the gradual increase in direct tax, has seriously dented people’s spending power and it is now more obvious than ever that incomes don’t stretch as far as they once did.”

David Bush, the head of retail at Grant Thornton, the accountants, said there was “no shadow of a doubt” that retailers selling discretionary products were now suffering. He said: “At places such as Land of Leather the trading has virtually fallen off a cliff in a very, very short period of time — we are talking three to six months.”

The Mintel survey comes just a day after the Royal Institute of Chartered Surveyors reported that Britain was experiencing its most widespread fall in house prices since records began 30 years ago.

A spokesman for the British Retail Consortium said: “It’s the big ticket items — the DIY and gardening retailers, electronics and also clothing — that have been doing the worst. People are cutting back on non-essentials.”

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