ECONOMIC OUTLOOK

FINANCIAL Conduct Authority (FCA) has called for Government intervention to help prevent a private debt crisis among cash-strapped consumers.

FCA chief Andrew Bailey said he was concerned about people taking out credit to cover everyday costs, singling out freelancers and those on short-term contacts as those in particular trouble.

However he said many were having trouble with “frontline” expenses such as council tax and utility bills, and many millennials and renters were having to borrow to make ends meet.

Crucially, he said that companies that offered credit to cover these types of costs were typically fairly aggressive in their recovery techniques, calling in bailiffs and ordering repossessions more quickly than traditional lenders.

Bailey added he was putting consumer credit at the top of the FCA’s “to do list” in 2017, as levels of personal borrowing were rising by 10% a year while real wages were falling by an average of 0.4%.

UK house prices fell by 1.1% in September, according to Rightmove. The national average was dragged down by a 2.9% fall in prices in London, without which the national figure would have been a more modest drop of 0.5%. High-end boroughs in London are worst affected. The website said the “usual autumn price bounce had not appeared.

A RICS survey found house prices rose across most of the UK in August, though they were down in London. And ONS data showed UK home prices rose 5.1% in the year to July. The average price of a UK home was £226,000 in July, up £11,000 from the same month last year.

Interest rates could rise as soon as November, the Bank of England hinted last week.

While the Bank’s Monetary Policy Committee voted seven to two against an immediate base rate increase, the majority thought “some withdrawal of monetary stimulus is likely to be appropriate over the coming months”. The statement sent the pound soaring to its highest level against the US dollar in a year.

It followed news that inflation hit a four-year high of 2.9% in August and the unemployment rate had fallen to a record low of 4.3%. Motor fuels and big increases in clothing costs were the main contributors to the rise in CPI, according to the ONS.

Meanwhile, the ONS said there were 181,000 more people in work in the three months to July compared to the three months to April. However, earnings growth continues to lag behind inflation. Average weekly earnings grew at 2.1% in the three months to the end of July, well below the latest consumer inflation (CPI) rate of 2.9%.

The 1% public sector pay cap is to be scrapped after the Government agreed to a 1.7% annual pay rise for prison officers and a 2% rise for police officers for the current year.

Consumer confidence has fallen to its lowest level since 2013, according to a Thomson Reuters/Ipsos survey. The index showed confidence in jobs down the most in the past month.

A separate survey by researchers Markit found a sharp decline in the cash that households have available to spend. The reduction was driven by higher prices and low wage growth.

The IHS Markit Household Finance Index dropped to 42.6 in the third quarter, its lowest for three years.