Increased credit and debt reliance fuelled by record cost of living increases

2nd August 2022

Worrying signs show a rapidly escalating reliance from UK households on credit and debt, in order to make ends meet in the face of record cost of living increases, according to the July 2022 Money Statistics, produced by The Money Charity.

Major increases continue to be seen this month in credit card use, as people across the UK find it increasingly difficult to match quickly rising expenditures with struggling incomes. In April 2022, there were 320.7 million credit card transactions, 23.7% more than the same time the previous year. The total spend on these cards was £17.7 billion, a 28.3% increase on last April.

Increased spending on credit cards in order to cover essential living costs means ever more people getting into unsustainable debt. At the end of May 2022, outstanding consumer credit lending was £202.2 billion, £4.8 billion more than in May 2021. Within the total, outstanding credit card debt came to £61.1 billion, a 8.39% increase (£4.7 billion) in the year to May 2022. Credit card debt averaged £2,197 per household and £1,155 per adult.

Debt charities are already reporting the reality of these figures, with StepChange saying 65% of new clients in May 2022 reported having at least one form of credit card debt. New debt advice clients were most likely to cite ‘a lack of control over finances’ as their most common reason for debt, with nearly one in five (18%) pointing to this. Increased cost of living is the second most cited reason at 16%. In May 2021, just 6% of clients gave this reason.

Debt concerns are not only to be seen in the area of credit cards however, with the Halifax reporting the average UK house price in June 2022 as £294,845, putting outstanding mortgage lending at £1,592.6 billion at the end of May 2022. That means that the estimated average outstanding mortgage, for the 10.98 million households with mortgage debt was £145,047 in May 2022.

Increased reliance on credit and debt are always understandable responses to financial difficulties, but also demonstrate extremely worrying trends for UK households and their finances. This recourse demonstrates both the profound way in which so many people are struggling, but also lay bare the broad lack of Financial Resilience across the UK.

This scenario is only likely to keep getting worse before it gets better, with unsustainable debt increasing and many forced to make more stark spending choices. It’s a deeply troubling, challenging time and we continue to call on those who can affect change to keep doing so. Meanwhile, for anyone finding themselves in difficulties, or seeing it coming, we’d urge them to seek out the many free advice and support sources available sooner, rather than later.

Michelle Highman, Chief Executive at The Money Charity