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U.K. Banks To Rein In Lending To Households As Inflation Cuts Into Wages

U.K. Banks To Rein In Lending To Households As Inflation Cuts Into Wages
In the U.K., the average household is having a problem because the rate of inflation is around 3% while the rise in wages is no more than 2.5%.
And what is worse is that the average British household is now being denied cheap loans – which was a source that was used to boost the household incomes.
According to people at the Office for National Statistics, till April of 2017, things were not so difficult. This was revealed in a report published by the agency about the spending habits of Britons in the annual family spending report.
The report shows that for the first time since the financial crisis, the level reached by the average weekly household spending was the highest in 2017.
But the report stresses that this figure is a camouflage to the original picture that is represented by a comparison of how the rich have thrived while those at bottom rung of the income ladder struggled.
For example, while the poorest 10% spent on water (£7.30) every week, the richest 10% had spent more every week on wine (£9.40).
At the same time, the poorest 10% spent £62.70 on rent while the richest 10% spent £59.40 on “furniture and furnishings, carpets and other floor coverings” weekly.
Compared to the poorest 10%, the research found that the richest 10% expended double the amount of the weekly shop (£17.50) to “alcoholic drinks, tobacco and narcotics”. This contradicts the notion that the poor waste off their money on booze and cigarettes.
But the segment that is eye catching is the new rich - the 65- to 74-year-olds. This group is well ahead in terms of spending on areas like entertainment and recreation compared to the average 20-something even though this group is no match to the top 10%.
Compared to what is spent by the udxer-30s, people of this group and particularly those who have crossed the age of 56, have focused their spending recreation which means that means they had devoted about one fifth of their total spend on recreation and culture, in the ten years after crossing the age of 65 years. This spending on recreation and culture is double of what the under-30s spend.
For this newly rich group, this expenditure can be bets described as the final salary pension bonanza and it has been identified as a once in a generation spending boost. This also applies to all people irrespective of their age, who earn below average incomes. While the richest half of households had marked an increase of about 1% in spending, the household of the lower than average income had increased their spending last year by a startling 7%. But this startling expenditure was financed mostly from savings and incurring additional debt.
But that debt fueled spending can now be consider dot be a one-off event as the banks have been instructed to reduce lending at low rates of interest by the financial regulator in the U.K. This is also comparable to the final salary payout segment and their spending.

Christopher J. Mitchell

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