Homeowner confidence recovers

UK homeowners expressed increasing confidence in the property market in February, saying they expect the value of their home to increase by an average of 1.5% over the next six months.

That’s according to Nationwide’s Consumer Confidence Index, which reported consumers anticipating a 1.1% house price increase when asked the same question in January.

Overall, the Index shows that confidence has doubled in the last year.

A quarter of people now believe there to be many or some jobs available - up three percentage points from January - while the proportion who believe there to be not many or few jobs available fell by six percentage points to 61% during the month.

The number of consumers who think the economic situation is bad dropped to 65% in February – the lowest level for 18 months.

Confidence in the future is even higher, with 39% of people believing the economy will be in better shape in six months’ time, and only 43% believing there will be not many or few jobs available - the first time this figure has dropped below 50% since September 2008.

When it comes to future household income, 88% of people now think they will be bringing home the same amount of money or more in six months.

Martin Gahbauer, Nationwide's chief economist, said:

"Following a small dip at the end of 2009, consumers have started this year in a more optimistic fashion with February's figures showing a surge in confidence in both the present and future situation.

“A strong influencing factor behind this uplift is likely to be the news that the UK has come out of its longest recession on record following six consecutive quarters of contraction beginning in 2008.

“By comparison, it would seem that consumers are perhaps feeling the pinch in their spending power as confidence declines in this area, and we may now be seeing the effects of the withdrawal of government driven incentives, such as the Stamp Duty holiday and lower VAT, impact on the index.

“Consumer confidence is crucial to a strong and sustainable recovery and, while confidence is likely to remain fragile for some months to come, the early signs do look positive."

Along with the latest Consumer Confidence Index, Nationwide has published its expectations regarding next week’s decision on the Bank Base Rate. It says there is a 95% likelihood that Base Rate will remain static at 0.5%, and a 5% chance that it will increase by 0.25% to 0.75%.