by business editor Trevor Sturgess

The squeeze on household spending may have eased but fears over job security and the cost of living are set to keep wallets closed.

That’s the verdict of the latest Markit Household Finance Index. It shows the slowest deterioration in household finances for nearly two years. There was reduced pressure on cash availability which fuelled higher spending and lower debt.

But twice as many households – 45% - expect their financial well-being to worsen over the year ahead as those that anticipate an improvement (20%).

This concern was seen across all housing types, income groups, ages and job sectors. People in the East of England, Scotland and the North East were the most pessimistic, with Londoners the least downbeat.

Tim Moore, senior economist at Markit, said: “While pressures on current finances have moderated again, helped by stabilizing incomes and lower debt, the steep reversal in future sentiment is a clear signal that households are likely to keep a tight rein on spending in the months ahead.”

He added: “The trends seen in October are broadly a repeat of the pattern seen at the same time during 2011, when confidence gave way after the summer and household finances took a turn for the worse towards the end of the year.

"Weak economic sentiment and worries about rising living costs are again the main factors bearing down on the outlook for households’ financial wellbeing.”