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UK households’ financial situation deteriorates at fastest rate in three years.Reuters

The financial situation of UK households deteriorated at the fastest rate in three years this month, according the new research published on Monday (24 July)

Research and analysis firm IHS Markit said its monthly Household Finance Index (HFI) dropped to 41.8 from June's 43.7; the lowest level since July 2014, pointing to an ongoing squeeze on household incomes as inflation rises faster than wages.

According to IHS Markit, as a consequence of the squeeze families were increasingly putting off big ticket purchases such as cars and large household appliances.

Tim Moore, a senior economist at IHS Markit, said: "There are signs that squeezed household budgets and worries about earnings have started to spill over to consumer spending patterns."

Moore also said a mere 27% of the households IHS Markit surveyed for the HFI study expected interest rates to rise in the next six months; the lowest proportion since October.

The country's consumer price inflation came in at nearly 3% in May; the highest in almost four years before slowing to 2.6% in June. However, annual wage growth is less than 2%.

"July's survey highlights that the recent moderation in inflationary pressures has yet to provide much relief," Moore concluded.