Households are the least downbeat about their finances in at least four-and-a-half years amid signs that house prices are back on the increase and workplace conditions are improving, a report has found.
Just over one quarter (26%) of people said their budgets worsened in July, while nearly one in 10 (9%) saw an improvement, according to financial information company Markit.
An overall reading of 41.5 for this month indicated the strongest household sentiment seen since the survey started in February 2009. Readings above 50 indicate that families' finances are improving and those below this level show a deterioration. While the overall reading is still a negative one, improvements have been recorded in four out of the last five months, Markit said.
The findings come at a time when inflation has surged to a 14-month high, intensifying the pressure on households. However, signs of blossoming confidence among home owners and rising incomes from employment have helped to create a "brightening picture", the report said.
Around 27% of people believe their finances will improve over the next 12 months, while 37% expect them to worsen, showing the least negative outlook since March 2010.
Sentiment among mortgage holders improved to a new high, while people living in the private rental sector were the least downbeat of all the housing categories.
House prices have seen stronger-than-expected increases this year, following the introduction of various government schemes which have made mortgages much more accessible. There have also been signs that the pressure is easing on the rental sector following a period of strong rental increases, as more people are making the jump on to the property ladder.
Private sector workers were generally optimistic that their finances were improving and reported the most marked rise in income levels since the survey started, while public sector workers were still downbeat.
People working in finance and business and IT and telecoms were the most bullish, while construction workers were the most negative.
Workplace activity has been increasing for six months in a row and job security also improved. Income from employment rose to its strongest levels since May 2010.