Number of UK households with large debts on the rise

The number of UK households struggling with large debts increased by a third in 2021. This increase came even before the winter rise of energy prices and the removal of the £20 uplift in universal credit payments.

Analysis carried out by the Jubilee Debt Campaign found that in September 2021 almost 10% of households reported that loan and interest repayments were a heavy financial burden. This is a 35% increase on 2020’s figures.

Additionally, households saw their average monthly loan repayments reach a record £373 in 2021, an increase of 22% from the previous year, standing at the highest figure for over a decade.

The campaign’s analysis, based on surveys taken in September 2021, is arguably even outdated now – with millions of households seeing major rises in their energy bills last month.

The increase in Ofgem’s price cap that came into action last Friday will mean see the average UK household experiencing a 54% rise in bills.This rise, combined with the phasing out of the £20 uplift in universal credit and surging food and petrol costs, will inevitably cause great strains on consumer finances and savings.

The Campaign’s findings concluded that this overall rising cost of living was threatening to “push people who are already living on the edge further into debt and poverty”.

Separate research, carried out recently by Citizens Advice, found that 5 million people had said that they would be unable to afford April’s energy price rises. Additionally, a further study published by the Money Advice Trust found that one in five adults were likely to now borrow or use credit in the upcoming three months to cover essentials.

Joe Cox, the senior policy officer at Jubilee Debt Campaign, concluded the report’s findings in arguing that “The government should target support to help those struggling with rising bills and mounting arrears and provide a ‘fair debt writedown’ to give people with high levels of debt a fresh start.”

Cox added: “We also need to see significant policies to deliver rising incomes and a decent universal minimum income floor to prevent these chronic debt crises from happening again. 

Debt charity StepChange on last Tuesday reported a rise in the proportion of people seeking advice who said that cost of living pressure was a reason for their debt in February.

Justine Gray of finance price comparison, Dollar Hand, commented: “Some action certainly needs to be taken. We have household bills rising at an alarming rate and everything including petrol and groceries increasing faster than wages. There are some ways that households can save money such as budgeting more aggressively or making cutbacks, but realistically we need faster growth in wages and help from the Government to help families avoid feeling the squeeze.”