UK household confidence has weakened further as fears over rising mortgage costs and job insecurity pushed the S&P Global consumer sentiment index down to 42.7 in September from 42.9 in August, the lowest reading in three months. The drop comes at a sensitive moment for the government, with Chancellor John Healey preparing his first budget next month.
Mortgage pain feeding through to household budgets
Fixed-rate mortgage costs have returned to multi-year highs, adding tangible pressure to living costs. Data from Moneyfacts cited in the S&P Global release showed the average two-year fixed residential mortgage rate at 5.88% and the average five-year rate at 5.92%. Both rates have edged up from last week’s figures and mark the highest levels seen since April and October of previous years respectively.
S&P Global highlighted the practical effect for homeowners: the rise in mortgage costs since the start of March 2026 is expected to add roughly £150 to monthly mortgage payments on a typical £250,000 loan repaid over 25 years. Official figures also indicate that the average monthly direct debit for mortgage payments has climbed from about £600 to £900 over the past four years — a significant shift for household budgets.
| Measure | Recent value |
|---|---|
| Consumer sentiment (S&P Global) | 42.7 |
| Average two-year fixed mortgage rate | 5.88% |
| Average five-year fixed mortgage rate | 5.92% |
Jobs outlook and credit concerns dent confidence
While mortgage costs are the most immediate squeeze on household finances, the survey also recorded a marked deterioration in sentiment towards the jobs market. S&P Global said confidence in employment prospects had fallen to its weakest point in around three-and-a-half years, with worries about the impact of artificial intelligence and employer caution on hiring cited as contributing factors.
Households also reported increasing difficulty accessing credit, a sign that expectations of tighter monetary conditions are beginning to filter through to borrowing. More than half of the 1,500 respondents surveyed said they expected borrowing costs to rise over the next year — a belief that can alter spending decisions now and cool consumer demand.
"Against a backdrop of rising volatility in energy markets linked to tensions in the Middle East, households increasingly reported difficulties accessing credit, suggesting that expectations of tighter monetary conditions are beginning to feed through to borrowing conditions," said Maryam Baluch, an economist at S&P Global Market Intelligence.
Implications for wages, prices and the budget
The combination of higher mortgage bills and weaker job sentiment presents a risk to consumer spending, which accounts for a large share of UK GDP. When households face higher fixed housing costs and worry about employment prospects, they typically cut discretionary spending — a dynamic that can slow growth and weigh on retail sales and services.
For the Chancellor, the timing is awkward. S&P Global flagged the possibility of tax rises in Healey’s upcoming budget to help cover the rising cost of government borrowing, which has been pushed up by geopolitical tensions in the Middle East. Any fiscal tightening would complicate the balancing act between supporting growth and bringing public finances under control — and it could further squeeze household incomes if taxes are increased.
- Mortgage burden: Average monthly mortgage direct debits have risen from about £600 to £900 over four years.
- Borrowing expectations: Over half of respondents expect borrowing costs to increase in the next year.
- Jobs sentiment: Confidence in labour market prospects is at its lowest in around three-and-a-half years.
In short, the survey suggests a squeeze on household finances is already under way, with higher mortgage costs hitting monthly budgets while worries about jobs and credit availability sap confidence. That combination could mute consumer-driven inflationary pressures in time, but it also threatens to slow growth and put pressure on living standards — precisely the outcomes Treasury officials will be weighing ahead of the budget.
Policymakers and markets will watch upcoming inflation and employment data closely for signs that the consumer slowdown is deepening. Until then, households grappling with bigger mortgage bills and a more uncertain jobs outlook look set to remain cautious, with consequences for spending, businesses and the broader economy.
