There’s no end in sight to the cost of living crisis affecting the country. In fact, for many families across the UK, it will get worse as they are expected to increase borrowing in order to cover basic bills and expenses.
This does not constitute advice and advice should be sought in all instances before acting on it.
With the expectation of additional interest rates coming down the pipeline, financial experts warn that for many households, they have a “timebomb of debt” ahead of them. They also warn to exercise caution as some companies are specifically targeting these struggling families to offer dubious debt repayment schemes that will only make their situation worse.
While much of the focus lately has been on the impact of high-interest rates on mortgage payers, the squeeze on household finances doesn’t end there.
The Joseph Rowntree Foundation (JRF) reports that 2.3 million low-income families have taken out loans or are using credit to pay for essential living expenses and bills during the cost of living crisis.
On top of these figures, almost 6 million families have unsecured debt such as credit cards, overdrafts, and personal loans from banks, credit unions, and payday lenders. The total debt owed by these families as of May shot up to £14.2bn. With £3.9bn in interest added, this works out to about £675 per family a year.
Despite this increase in debt, it’s not actually preventing some families from falling behind with their payments.
Seventy-five percent of households are reporting being in arrears with at least one bill or commitment, and 44% in arrears with three or more bills.
Additionally, 2.8 million low-income households have been refused a loan in the past two years, preventing any semblance of responsible borrowing from occurring.
Even though inflation is on the back foot thanks to ever-increasing interest rate hikes, experts fear that a second wave of the cost of living crisis is imminent. The current situation facing the nation is incredibly tenuous and should be a priority for policymakers, but unfortunately, that isn’t the case.
Keep up to date on the latest news affecting the UK economy and be sure to set up a meeting with your trusted financial adviser to discuss any concerns you may have.