UK Consumer Confidence Hits Three-Year Low on Rate and Job
A key survey shows UK consumer sentiment fell to a three-year low in September, driven by fears of higher interest rates and job market insecurity, posing
UK consumer confidence has dropped to its lowest level in three years, according to the S&P Global consumer sentiment index. The decline is attributed to household fears over potential interest rate rises and growing job insecurity.
The index fell to 42.7 in September from 42.9 in August. S&P Global stated this indicates a notable strain on financial confidence across UK households. More than 50% of the 1,500 survey respondents said they expect borrowing costs to increase over the next year.
Fixed-rate mortgage costs have already climbed to multi-year highs. Data from Moneyfacts shows the average two-year fixed residential mortgage rate rose to 5.88% on Monday, its highest since April 16. The average five-year rate reached 5.92%, its highest since October 2023.
| Mortgage Type | Average Rate | Recent High Since | Previous Rate (Last Friday) |
|---|---|---|---|
| Two-Year Fixed | 5.88% | 16 April | 5.84% |
| Five-Year Fixed | 5.92% | October 2023 | 5.88% |
Since the start of March 2026, the rise in mortgage costs is expected to add about £150 to monthly payments for a typical £250,000 loan over 25 years. Official figures show the average direct debit for monthly mortgage costs has risen from about £600 to £900 over the past four years.
Downbeat Mood Among Households
Maryam Baluch, an economist at S&P Global Market Intelligence, said improved sentiment following the new government is being eroded by renewed worries. She cited concerns over energy prices, the cost of living, and job prospects.
"Against a backdrop of rising volatility in energy markets linked to tensions in the Middle East, households increasingly reported difficulties accessing credit," Baluch said. She added that expectations of tighter monetary policy are beginning to affect borrowing conditions, posing downside risks to the economic outlook.
Job Market and Business Investment Concerns
Confidence in the jobs market has plunged to its lowest level in three-and-a-half years. Analysts note threats from artificial intelligence and employer caution about hiring. A steady decline in payrolled employees over six months and a drop in vacancies to a five-year low suggest employers are worried about future profitability.
The British Chamber of Commerce has called for extra government support for businesses after a series of tax rises. A survey of 5,000 companies in Q2 2026 found only 17% planned to increase investment in the coming months, a post-pandemic low.
Political and Budgetary Pressure
The falling confidence presents a blow to Chancellor John Healey ahead of next month's budget. He could announce tax rises to offset the rising cost of government borrowing, which has soared due to the Middle East conflict.
Analysts say Healey may limit tax rises to wealthier groups, including a potential increase in capital gains tax. However, they believe discreet tax rises are unlikely to raise sufficient funds for higher defence spending and debt costs while preserving a fiscal buffer of at least £20bn.
In response to calls for tax cuts, Liberal Democrat leader Ed Davey said at his party conference that the UK should cut fuel duty. The German government announced plans for a fuel tax cut of about 15p, effective October 1. Last week, Andy Burnham said difficult economic decisions would be needed to keep the economy on track.
