As winter sets in and utility bills rise, more households are likely to turn to credit cards and loans “to bridge the income-spending gap,” warns a major debt charity.
Mortgage payments, rent increases, food costs soaring, Utility costsmay force householders who have never borrowed before into debt in order to make a living.
“It is important to recognize that the use of credit to cover essential spending carries risks, especially if it is economically unresilient and the only option available is high-cost credit. It is important to recognize that there are risks involved for those who believe that
bank of england interest rate hike It increased from 0.75% to 3% on Thursday. This is the biggest rise since 1989 and means thousands of households will pay more on their mortgages. Banks and other lenders may use this opportunity to raise the cost of other loans and credit cards.
Money Advice Trust’s Director of External Relations and Partnerships Jane Tully agreed with Anderson’s view.
“As millions of people’s incomes are unable to keep up with rising prices, more people are having to rely on credit to cover their essentials.”
According to the charity, one in five of StepChange’s new clients seeking help now cite the cost of living as the main cause of their debt problems.
Unexpected loss of income due to illness or layoffs has overtaken as the top driver for people seeking debt assistance as rising costs of living mean they are struggling to make ends meet.
The Advice charity said it has not seen an increase in customer debt so far, but that this is a risk as the cost of living crisis intensifies over the winter.
Victor Trokoudes, CEO of savings app Plum, said:
“As more and more households take out re-mortgages, it will put further pressure on people’s budgets and could push desperate households toward additional unsecured borrowings. Demand for credit is expected to rise.” But getting traditional products like loans and credit cards approved can be more difficult for many people,” he said.
PwC Fintech Leader Peter Hewlett said: “This means that people who may have historically relied on credit in emergencies may find it more difficult to get loans and credit card approvals.
“We expect the use of other payment options such as ‘buy now, pay later’ and splitting payments over multiple months will weigh more as people try to set aside funds for essentials. doing.”