Millions Of UK Families Using Credit Cards And Loans To Pay Basic Bills  

• Millions of families are borrowing to cover basic bills and expenses, according to an analysis that warns Britain is entering a dangerous new phase of the cost of living crisis.
• Political attention has focused on the impact of interest rates on mortgage payers, but they are also having an impact on those on tight budgets. In many cases, the option of borrowing is being cut off.
• Nearly 6 million low-income families have unsecured debt, such as credit cards, overdrafts and personal loans from banks, credit unions and payday lenders. In May this year, they owed £14.2bn in total. Interest on this debt was £3.9bn, equivalent to about £675 a year per family.
• Using credit to pay bills is not preventing households from falling behind with payments. Three-quarters of the respondents report arrears with at least one household bill or lending commitment, with 44% in arrears with three or more bills. Meanwhile, 2.8 million low-income households said they had been refused a loan between May 2021 and May 2023.
• “Despite inflation falling back, we risk the tragedy of a second wave in this crisis, as millions of people struggle to maintain their borrowing given rising interest rates. The fragility of the current situation ought to be a preoccupation for policymakers everywhere, but on the contrary, it is in danger of being overlooked. While rising mortgage costs dominate the national conversation, the affordability of short-term credit should also be a factor of vital concern,” said Rachelle Earwaker, Senior Economist at JRF.

(Source: The Guardian)