‘Growing optimism’ over household finances

A BELIEF that employment markets will improve in the next 12 months is leading customers of credit lender International Personal Finance to be more optimistic about their household finances, according to new research.

The second Financial Wellbeing and Inclusion Report, carried out by YouGov, looked at the financial wellbeing of IPF customers across Europe and Mexico.

Leeds-based IPF lends to customers in Poland, Hungary, the Czech Republic, Romania, Slovakia and Mexico, who are from socio-economic groups which are often excluded from mainstream financial services.

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The report found that while half of IPF’s customers across Europe and Mexico think their national economies will deteriorate over the next 12 months, nearly one in three foresee economic stability and 39 per cent expect their own household finances will improve.

It said the optimism is driven by a perception of an improvement in the employment markets; either by a change of a job, or an increased income.

The research found that Mexicans are the most optimistic about their household finances with over half saying things will improve in the next 12 months.

Poland and Czech Republic saw the biggest increase in household optimism against the same period six months ago.

John Mitra, group corporate affairs director of IPF, said: “The results of the latest Financial Wellbeing and Inclusion Report provide further insight into the financial wellbeing of many of our customers.

“It is encouraging that there is increased optimism around household finances and people are generally more positive than just six months ago about how their national economies will perform.

“This research tells us our customers make considered decisions and central to this is the degree of confidence they have about the level and stability of their household income.

“As a result, we know we can continue to responsibly service this often underserved segment of society and make a positive difference to their lives.”

The report also found that the high cost of living remained the number one concern for half of IPF’s customers across Europe and Mexico.

This was followed by concerns over unemployment (21 per cent) and neighbourhood crime (11 per cent).

In Mexico, however, fear of neighbourhood crime was the principle concern for a third of people.

In addition, more people in Mexico are worried about neighbourhood crime and the cost of living compared to the results of the previous survey – up from 28 per cent to 34 per cent and from 13 per cent to 22 per cent, respectively.

Out of all the countries surveyed, people in Hungary were the most concerned (80 per cent) by the high cost of living.

When the cost of living was investigated further, the main reason was found to be the increase in the cost of food (33 per cent).

This was particularly true for customers from Slovakia, Hungary and Poland.

In Romania, however, nearly half said increased utility costs were principally to blame.

To counter these concerns, IPF said most of its customers (77 per cent) have continued to spend cautiously reducing expenditure on socialising, consumer goods and holidays.

Some customers have also cut back on buying quality food and heating.

Spending on education and healthcare are the areas least affected by tighter consumer spending.

Mr Mitra added: “It is clear that many household budgets are under continued pressure and they have reduced their spending accordingly.

“It is worth noting that spending cuts are done mainly on luxuries rather than essentials, which shows that many of our customers are reasonable and rational in their decisions.”

In total, 9,660 adults over the age of 18 completed the survey.

In April, IPF reported a 50 per cent rise in first quarter pre-tax profits - to £9.1m from £6.1m the year before - thanks to an increase in customer numbers and higher loan values.

It said the key driver of its record results was an 11 per cent increase in the amount of credit issued.

Chief executive Gerard Ryan said the group is making larger loans and is testing longer loan periods.