Households upbeat about finances as interest rate hike expectations fade


Households have turned positive about their financial prospects for the coming year - as most now believe there will be no interest rate hikes for at least the next 12 months - a survey has found.

The Household Finance Index compiled by Markit found that households felt a renewed optimism towards the year ahead in February.

The index's overall reading for financial wellbeing in the next 12 months increased to 50.2 - up from 49.7 in January.

Readings above 50 signal that people's situations are improving, and ones below 50 indicate they are getting worse.

Private sector workers tended to be upbeat about their financial prospects for the next 12 months, while public sector workers were more pessimistic, the report found.

And for the first time since late 2013, less than half of households said they expect the Bank of England base rate to increase in the next year.

Just 46% of people predict a rate rise before February 2017 - down from 71% in January.

Relatively low inflation is also expected to continue over the coming year, easing the squeeze on people's finances, the survey of 1,500 working age people from across Britain found.

Chris Williamson, chief economist at financial information services provider Markit, said the findings show a "dramatic" change in expectations of when the Bank of England will hike interest rates.

He said: "The more 'dovish' interest rate outlook no doubt in part reflects gloomier rhetoric from the Bank of England. Much of the survey data were collected after the release of the Bank's latest inflation report, which painted a darker picture of both future economic growth and the inflation outlook."