Setback in consumer confidence

BRITONS have become more gloomy over the past month amid worries about the long-term health of the economy.

In an unexpected reverse, the latest consumer confidence barometer from Martin Hamblin GfK fell to minus 3 in August from minus 1 in July, ending the steady improvement since the end of the war in Iraq.

Martin Hamblin GfK director Roger Wright said: 'Consumer confidence has stumbled, mainly because people are unsure about the outlook for the economy. But we think it's nothing to get alarmed about and the next few months should see confidence levelling off or improving again.'

The news came as fresh evidence of an insatiable appetite for equity release schemes emerged from the British Bankers' Association.

Some 35% more mortgage equity withdrawal loans were signed in July than a year ago. By value, the figure was 40% higher. MEW - where homeowners unlock cash tied up in their properties to spend on major purchases such as holidays, new cars or kitchens - have surged in popularity as an easy and low-cost form of borrowing.

However, many of the borrowers are elderly people wanting to supplement their pensions, and consumer groups fear that they are not being given adequate advice.

The Bank of England sounded a fresh warning to borrowers, reminding them that interest rates are likely to be higher in the medium term.

Monetary policy committee member Paul Tucker, who described the rate debate as 'finely poised', said higher debt meant households were more vulnerable to economic shocks.

'Ultimately it depends on individual households, and their lenders, reaching their own view in the light of their particular circumstances,' he said.