Lifestyles in the UK have undergone large changes. Today the average size of the British household is falling (from 2.5 in 1993, to just 2.3 in 2003) and is expected to continue to fall for some time to come. But some of the most severe changes are to be found in how we deal with personal finances. Mintel, the global research company, in its ‘British Lifestyles’ report takes a look at how we are saving and investing for the future.

Today almost half (45%) of what the British spend goes on housing and finance - some £400 billion. This is up from the 39% of ten years ago. As consumers have become wealthier, they have invested more in property, pensions and insuring their lives and their increasing array of possessions.

One big change in the world of finance has been the impact of convenience on the way that we take care of our finances. Today both telephone and Internet banking are well-established time saving services and people no longer need to go down to see their friendly local bank manager.

In 2003 there were some 33 million current and instant access savings accounts accessible by the telephone. This amounts to almost one in three (28%) personal bank accounts. Just five years ago the figure was nearer one in five (18%). The number of people with access to an online banking service has exploded from 0.4 million to some 17.2 million.

There has also been considerable financial activity, which has changed the face of the financial markets over the past 10 years.

The housing boom has dominated the market trends of late. Total expenditure on housing more than doubled between 1993 and 2003, from £106 billion to £232 billion. The housing boom can clearly be seen by the fact that since 1998 expenditure on house purchase has risen by over 87%, while during the early 1990s it grew by nearer just 31%. Historically low interest rates, economic stability and a low unemployment rate have all contributed to this.

Peter Ayton, Chief Statistician at Mintel says: "The media has been full of speculation about an imminent crash of the market. But even though the market may now be past its peak, Mintel sees no reason to believe that there is going to be a crash in the housing market, as seen in the early 1990s.”

“In fact, the market is set to continue to rise,” continues Ayton, “But the growth will be at a more measured pace than has been seen over the past 5 years as the rest of the country catches up with the South East."
.
We all know that house prices have risen considerably. The average house price in the UK is now in the region of £153,000, while back in 1993 this was closer to just £65,000. This equates to a massive 139% increase.

London has the highest housing prices at an average of £234,000, some £85,000 above the national average. But the ripple effect is now taking hold and is spreading west and northwards. The East Midlands leads the way with price increases of around 25% over the past year, while Yorkshire and Humberside, the South West and the North have all seen at least 20% growth in prices.

"Pension providers have had a difficult few years with this strong growth in house prices shifting demand toward property investment. People have also focused more on spending rather than saving and a fragile stock market has scared many investors away from equity based products," explains Peter Ayton.

Indicative of this is the fall in value of total (regular and single) new pension premiums from £3,352 million in 2002 to £2,876 million in 2003.

People have for some time now been spending more than they earn. In fact, while overall consumer income increased by 65% over the past decade to exceed £900 billion for the first time, consumer spending grew even faster at 73%.

As a result there has also been the fall in the amount we are saving as a percentage of personal disposable income (PDI). While back in 1993, just after the last economic crash, more than 10% of our PDI was put into savings, as people were feeling more vulnerable. Today the proportion is around half this at just 5.5%.

"This clearly shows that spending rather than to saving has been a priority for people recently. But there are now indications that people are starting to tighten their purse strings. A savings ratio of 5.5% is in fact slightly higher than that of 2002," explains Peter Ayton.

We have all heard the horror stories of phenomenal debt and there is good reason for this. Since 1993, net consumer debt has risen by 624% from £2.63 billion in 1993 (a particularly low year) to a massive £19.07 billion last year.

But again here there is evidence of people starting to curb their borrowing as net credit levels have decreased from a peak in 2002 of £21 billion.