New data from TransUnion, a global information and insights company, has revealed that more than two in five (43%) UK consumers were optimistic about their household finances over the next 12 months. The figure is up from 41% in Q1 2025 and a significant increase from a low of 26% in Q3 2022, according to the data released as part of its Q2 2025 Consumer Pulse report. Gen Z showed the largest year-on-year (YoY) increase in financial optimism, up nine percentage points to 64%.

Yet, as household inflation unexpectedly jumped to 4.1% in the year to June, 85% of UK adults ranked inflation for everyday goods among their top three financial concerns over the next six months. Interest rates (54%) were the second most cited concern, followed by recession fears (49%). Housing costs were also a key concern for 42% of consumers, with the impact strongest among Gen Z (61%) and Millennials (52%) who may be trying to get on the housing ladder.

James O’Donnell, Director of Research & Consulting at TransUnion in the UK, said: “Despite growing consumer optimism, the long shadow of high inflation and high interest rates continues to put pressure on consumer spending; this is exacerbated by a weakening jobs market and lower wage growth expectations. In today’s economic climate, access to responsible credit and effective credit education is more important than ever. Encouragingly, consumers are becoming more proactive, with a growing number regularly checking their credit reports. Gen Z, in particular, stands out; with nearly 90% reporting that they monitor their credit, reflecting both their awareness and the industry’s efforts to improve financial literacy. It’s promising to see this level of engagement, especially in challenging times.”

Despite signs of economic stabilisation, consumers remain cautious. While the proportion of consumers expecting to miss a current bill or loan payment dropped from 24% in Q2 2024 to 17%, essential spending pressures remain as almost half (49%) expect their bills and loan repayments to increase in the next three months. Potentially as a result, 47% of consumers have reduced discretionary spending – including dining out, travel and entertainment – in the past three months, with 41% planning to cut back further over the next three months.

Access to credit and lending products is crucial to build resilience, particularly as younger generations aim to reach financial milestones. Two in five Gen Z (43%) and Millennial (40%) consumers plan to apply for new credit or refinance existing credit in the next year, compared to only 18% of Gen X and 5% of Baby Boomers. The most common products among those planning to apply for new credit or refinance existing credit included credit cards (57%) – up from 49% a year ago – buy now, pay later services (26%) and personal loans (26%).

Yet, despite 97% of Gen Z and 93% of Millennials believing it’s important to have access to credit and lending products to achieve financial goals and high credit demand, only half of Gen Z (50%) and Millennials (52%) believe they have sufficient access to credit and lending products.

Credit monitoring also varies across generations, with Gen Z consumers (89%) most likely to monitor their credit reports. While 37% of all respondents believe credit monitoring is at least very important, this sentiment was strongest among Gen Z (58%).