More people struggling to pay household bills
DEMAND for help with debts is expected to reach a five-year high across 2018 as people increasingly find themselves struggling with everyday household bills, according to a charity.
National Debtline, which is run by the Money Advice Trust (MAT), predicts it will have received 189,000 calls by the end of 2018 – its highest level of demand in the last five years.
It said callers are increasingly struggling with arrears on everyday household bills, with people facing smaller but trickier debts to deal with.
Half of callers to National Debtline are now struggling to repay debt of £5,000 or less – up from 22 per cent in 2008.
Three in 10 callers have council tax arrears – up from about one in six (15 per cent) in 2008. The proportion of callers with rent arrears has risen from six per cent to 17 per cent, and energy arrears from nine per cent to 14 per cent in the same period.
People contacting National Debtline increasingly have more money going out on essential spending than they have coming in, it said. Nearly half (48 per cent) of callers now have a budget deficit – up from 27 per cent in 2009, it said.
The charity said it wants to see a single approach across different bodies to reduce problem debt.
MAT chief executive Joanna Elson said: “We need to change how we think about problem debt in the UK.
“Ten years ago a typical caller to National Debtline was struggling to pay credit cards and personal loans.
“Today, callers are struggling with smaller but trickier debts, usually on everyday household bills – and often caused by broken budgets, where the money coming in is simply not enough to cover their essential spending.”
Despite the warning, households’ non-mortgage borrowing slowed to its lowest annual growth levels in nearly three years in July, Bank of England figures show. The annual growth rate of consumer credit – which includes borrowing on credit cards, overdrafts and personal loans – slowed to 8.5 per cent in July, from 8.8 per cent in June. It was the lowest annual growth rate since November 2015.
Annual growth in consumer credit had climbed to ten per cent in May 2016 and for much of 2016 and 2017 remained in double digits, prompting fears that some people could be at risk of over-stretching their borrowing.
Despite the slowdown, the Bank’s Money and Credit Report said the 12-month growth rate remains “elevated” compared with 2009 to 2012.
Peter Tutton, head of policy at StepChange Debt Charity, said: “Consumer confidence has been fragile over the summer months and this may be reflected in less demand for credit, for bigger ticket items in particular – and, with continuing economic uncertainty ahead, this lack of confidence may continue.”
Howard Archer, chief economic adviser at EY Item Club, said: “The recent impression has been that consumers have become relatively cautious in their borrowing while lenders have certainly become warier about advancing unsecured credit and tightened their lending standards.”
The possibility of further interest rate rises over the coming months may well be limiting households’ willingness to borrow, he added.