7th February 2026
Things are getting tighter for households in the UK and particularly in Scotland where household savings are lower. Household finances and consumer confidence are shaping the economy as of early 2026 including spending patterns, debt, savings, housing, and the impact of inflation and living costs.
First we look at the UK then Scotland o its own further down this page
The stand out problem is families and individuals do not have enough savings to get them through difficult times.
Current Level of Consumer Confidence
Consumer confidence is weak overall
The Deloitte UK Consumer Tracker (Q4 2025) shows consumer confidence has dropped to its lowest level in about two years (around -11.1 on their index). This reflects weaker sentiment on household income, debt and overall finances.
Other measures also show caution
The GfK Consumer Confidence Index a long-running UK measure — was at -16 in January 2026, slightly improved but still below neutral.
Surveys like TransUnion's Consumer Pulse find only about 44 % of consumers optimistic about their household finances, with significant variation by income group. High earners are much more optimistic than low-income households.
Effect on spending patterns
Lower confidence is associated with:
Reduced discretionary spending a larger share of households cutting back on non-essential purchases.
Consumers becoming more defensive and value-focused, prioritising essentials.
Lower confidence generally dampens overall consumer spending, which is a major driver of economic growth, slowing GDP expansion if the trend persists.
Debt Levels, Savings and Household Finances
Rising Household Debt
Total UK household debt has exceeded £2 trillion for the first time, equivalent to around £71,000 per household. The majority (around 80 %) is secured debt (mortgages).
Household debt relative to disposable income has been reducing slightly in recent quarters, but still remains high.
Savings Rates
After the pandemic, UK banks and ONS data showed that households maintained higher savings rates than before 2020. That helped some people weather inflation spikes. (Historical surveys show savings as high as 11 % of income in past periods.)
However, many low-income households have run down savings or never built buffers because rising living costs eroded disposable income.
Financial Resilience and Literacy
Despite high debt, surveys show many consumers feel confident about managing finances, but there is a disconnect between perceived confidence and actual understanding of financial products.
Housing Market & Household Budgets
Housing Market Trends
The UK housing market has seen mixed signals: house prices have recently risen again, with some lenders reporting annual growth, but mortgage approvals have weakened.
Mortgage Costs and Household Strain
With higher rates over 2023-25, many households faced higher mortgage repayments, which squeezed budgets — particularly for variable or maturing trackers. Although recent interest rate decisions held rates at 3.75 %, affordability pressures remain.
This dynamic tends to reduce other consumption as households divert income to service housing costs.
Saving vs Debt Management
Are people saving more or less?
Some longer-term data show higher savings rates than pre-pandemic for many households, partly due to pandemic era saving "buffers" that persisted.
But many lower-income households have depleted savings or were never able to save, especially amid inflation spikes on essentials (food, energy).
Debt Management
Households are showing mixed behaviour:
Some are reducing discretionary spending and tightening budgets.
Others are carrying more secured debt (mortgages).
Consumer sentiment reports suggest a significant share of households still expect challenges in paying bills/loans — especially among younger generations.
Impact of Rising Living Costs and Inflation
Even though inflation has eased from its 2022 peak, the cumulative effect of price increases remains high:
Most adults report their cost of living is still increasing, with food and energy prices often cited.
Real household incomes fell in recent years (meaning incomes didn't keep pace with costs), especially for the lowest-income households.
Low-income families have seen disproportionately higher inflation rates because they spend a larger share of income on essentials.
This has led to:
More households cutting back on essentials and discretionary spending.
Higher material deprivation and food poverty measures than before the inflation surge.
How Household Finances Are Shaping the UK Economy
Consumer Confidence
Weak around lowest in 2 years; dampens spending.
Spending Patterns
Shift toward essentials, less discretionary spending.
Debt Levels
Rising to record totals; mortgages dominate.
Savings
Historically higher than pre-pandemic for some but uneven across incomes.
Housing Market
Prices rising, mortgage approvals weak — affordability issues.
Living Costs / Inflation
Still elevated cumulative costs; hits low-income households hardest.
Overall Economic Impact
Weak consumer confidence and tight household budgets tend to:
Reduce consumer spending growth, slowing GDP growth.
Shift spending toward essentials, hurting sectors reliant on discretionary spending.
Increase financial caution, with more focus on saving and debt management.
Create uneven outcomes across income groups, exacerbating inequality pressures.
Scotland
A Scotland-specific breakdown of how household finances and consumer confidence are shaping the economy focusing on spending, savings, debt, and the impact of rising costs and inflation:
Consumer Confidence in Scotland
(Current Situation and Spending Intentions)**
Consumer sentiment is negative overall
The Scottish Consumer Sentiment Indicator was -6.5 in Q1 2025, showing households on balance feel pessimistic about economic performance and their own financial security; sentiment continues to weaken compared to late 2024.
Reduced willingness to spend
People are less relaxed about spending money, which tends to dampen consumer demand and slow economic growth.
Confidence mixed but improving from earlier years
Compared with the peak of the cost-of-living crisis (2022-23), financial confidence has improved — fewer households now lack confidence about their finances in the short term than before — but overall sentiment remains subdued.
Summary
Scots are cautious — household confidence remains below positive territory, and many are tightening belts rather than boosting spending.
Savings, Financial Resilience, and Debt
High proportion of households with no savings
Around 32 % of Scottish households have no savings at all, notably higher than the rest of the UK (23 %).
Financial struggles are relatively common
One-in-five households (20 %) say they are currently struggling to pay for essentials like food and other necessary expenses.
About one-in-seven (14 %) are very worried about their finances over the next 12 months.
Savings behaviour
Official data shows the household savings ratio (the proportion of disposable income saved) rose to about 6.6 % in early 2025, up from 5.6 % a year earlier — suggesting some households are saving more relative to income, partly due to cautious feelings about the economy.
Debt pressures and arrears
There's a sharp rise in household bill arrears and energy debt among people seeking debt advice in Scotland:
Average bill arrears per client increased substantially year-on-year.
Energy debt or arrears have also grown, with an estimated 15 % of households in energy debt — a legacy of high bills during the cost-of-living crisis.
Financial resilience
A Financial Conduct Authority survey found 23 % of Scots have low financial resilience (low savings and heavy burden from bills/credit), though this is down from recent years.
Housing and Household Budgets
While there's no Scotland-specific breakdown of mortgage costs in these recent sources, similar UK patterns apply:
Mortgage costs and housing affordability remain key pressures for many households, especially with high debt burdens and interest costs still elevated (mirroring broader UK trends).
High housing costs squeeze disposable income and reduce spending in other areas (this is a well-documented driver of financial stress across the UK context).
Impact of Inflation & Cost of Living
Cost pressures remain significant
Many households continue to feel the impact of rising living costs, especially on essentials:
Energy bills and general household costs still cause financial strain, even if recent energy price falls have eased pressures somewhat.
Behavioural responses
Because living costs remain high relative to incomes for many:
Spending on non-essentials is reduced
More consumers are prioritising essentials and savings
Some are resorting to borrowing or debt when income falls unexpectedly.
GET SAVING IF YOU CAN
A savings cushion can help avoid drops in income or pay for unexpected bills.
Further Reading On The UK Economy
Regional Economic Disparities in the UK - Challenges Causes and Policy Responses
The UK Housing Market and the Economy - A Delicate Balance
The State of the UK Labour Market in 2025 Trends Challenges and the Road Ahead
Inflation in the UK Where We Stand Now and What Comes Next
What are the key risks to the UK economy in the short and long term
Current state of UK economic growth