07 Jun 2022 | Posted In Money advice news

New data from StepChange Debt Charity shows that the cost of living was the second most commonly cited reason for debt in April 2022, up from the third most common in March 2022 and the sixth most common in 2021. The proportion of clients citing the cost of living as a driver of their problem debt is now 15%, more than twice the 6% cited in 2021.

Meanwhile, new data from the Bank of England shows consumer credit borrowing rose to £1.4bn in April, up from £1.3bn in March. These continued high levels of borrowing reflect the budget pressures many people are facing and are potentially an indicator of households’ ongoing need to use credit to make ends meet. With StepChange research from earlier this year revealing that one in three households were already struggling to keep pace with bills and credit commitments, a sustained reliance on credit is a concern given the cost pressures so many are under.

Commenting on StepChange’s client data, Richard Lane, StepChange Director of External Affairs, said:

“It’s no surprise to see the cost of living become an increasing driver of problem debt among our new clients – rising interest rates and spiralling inflation have eroded households’ disposable income in the past few months, even before the effects of the new energy price cap rise have been fully felt.

“The Government’s latest support package was very timely and welcome, both in terms of its scale and in the way it will be disbursed. However, given the intense pressure many households are clearly already under, and with the first support payment due in July, there’s a danger any extra funds will be eaten into by debt repayment demands before October’s energy price cap rise comes to bear. Government must be attuned to this in the coming months by continuing to examine every option for helping those on the lowest incomes. Pausing benefit deductions and enforcement action on energy debts would be a welcome start.”