One in four of Britain’s poorest households are falling behind with debt payments or spending more than a quarter of their monthly income on repayments, according to a study.
The latest evidence of mounting debt problems for some of the most vulnerable in society is shown in a report by the Rowntree Foundation, at a time when borrowing on credit cards, loans and car finance deals returns to levels unseen since before the 2008 financial crisis.
Households experiencing poverty spend 34 per cent of their gross income on debt repayments, compared to just eight per cent for average households. Of those, a third are already struggling to keep up with debt repayments.
Households are borrowing simply to live because their incomes are too low to make ends meet. Their debt spirals into an endless cycle because borrowing costs are too high, leaving them with little way out.
For a household of two adults and two children aged between 30 and 44 to be in the poorest tenth, they would have a net annual income of up to £23,200. Young adults are much more likely to be in households in arrears or paying large chunks of their income to banks or credit card providers, the report found.
The figures pose a challenge to the government, which was warned last year that Britain’s consumer credit bubble of more than £200 billion was unsustainable. Debt-fuelled spending since 2017 has also taken place against the backdrop of the Brexit vote, which triggered a rise in inflation at a time of weak wage growth
Analysts warned that a squeeze on household incomes from benefit cuts, lacklustre wages and high inflation would continue to force poorer households to borrow more to pay basic bills.
Regardless of the circumstances, our team at Gibson Hewitt can provide help to you if your client is struggling with debt issues. To find out more, please contact us.