One in eight people have borrowed money in the past 12 months just to make ends meet, according to StepChange.
A poll by the debt charity found two in five (40%), are finding it difficult to keep up with household bills and credit commitments, up from one in three (34%) in September 2023. This equates to an increase of 3.5 million people in just four months.
According to the survey, one in four (24%) households have rationed heating, electricity or water to meet credit repayments in the past 12 months, up from one in five (21%) in September 2023.
The charity is urging the Government to reassess its cost-of-living support for households ahead of the Spring Budget after its polling laid bare the financial crisis faced by many households.
Unexpected expenses
People were also asked about their ability to cope should they be faced with an unexpected expense of £1,000. One in eight (12%) people said they would not be able to cover any without turning to borrowing, rising to one in five (19%) among single parents.
StepChange, alongside other charities, has raised the alarm about the Household Support Fund ending in March.
The fund was introduced in October 2021 to support households who would otherwise struggle to buy food, pay essential utility bills, or meet other essential living costs or housing costs.
Calls for energy debt to be written off
The charity also pointed out that although energy bills are due to drop from April, energy prices remain significantly higher than two years ago.
According to estimates from Ofgem, energy debt has reached a record £2.9bn, with StepChange noting a similar trend of high energy debt among its clients.
Vikki Brownridge, CEO at StepChange, said: “In an election year, tackling such widespread problem debt and improving households’ financial security should be at the top of the agenda for current and potential new Governments. We’re fast approaching a point where all measures brought in to support people with the cost-of-living crisis are due to end, yet as this research shows, managing the cost of essentials has become more difficult for people in recent months.
“We were disappointed the Government has not taken forward the introduction of a social tariff in energy as we continue to see first-hand the pressure that high energy bills have put on our clients over the past two years. To give low-income households a chance of building up any financial resilience this year, we’d like to see energy debt written off for those who cannot afford to pay.”
Alastair Douglas, CEO of TotallyMoney, said: “Millions of people are unable to warm their homes, fill their fridges, or keep up with credit commitments. And with Government support lacking, people are turning to credit to plug the gap and cover the essentials.
“The worry is that as demand is growing, so is caution from the banks. They’re restricting who they’re lending to, creating a credit crunch for would-be borrowers. As a result, we’ve seen a boom in unregulated buy now pay later (BNPL) borrowing, and 2.6 million low income households have turned to high cost or illegal money lenders.
“And while inflation may have dropped from its 11.1% peak, it’s still double the Bank of England’s target. The cost of living isn’t getting any cheaper – it’s still on the rise – and without action, people will continue to struggle for years to come.”
