40% of middle income earners struggle to cover a £300 bill

Middle income earners are increasingly falling into financial precarity, according to a report by lender Plend and investment specialist Triple Point, with 40% of those unable to cover a sudden £300 bill, the Financial Conduct Authority’s own benchmark for financial resilience, now earning above the national median salary.

A third of UK adults (35%) are borrowing simply to cover essentials such as food, heating and rent, and 89% say they have felt the impact of the cost of living crisis over the last year, up from 84% the year before. The appetite for a solution is clear too: 37% of UK adults say access to a genuinely low interest loan would improve their finances, rising to 58% among 18 to 34 year olds.

Much of this exclusion, the report argues, comes down to how lenders decide who can borrow. Traditional credit scores were built for one kind of borrower: someone with a long credit history, stable employment and a mortgage. The report instead calls for the wide adoption of open banking, which judges people on their real financial behaviour, such as income, rent payments and everyday
spending, rather than a historic score.

The case is strengthened by the numbers on repayment. Among people with unstable incomes who hold a credit card, 80% meet or exceed their minimum monthly payments. The problem, the report concludes, is not that these borrowers cannot repay. It is that the system rarely gives them the chance to prove it. Its first recommendation is that the Financial Conduct Authority and

The report also identifies a widening gap between the help people need and the help they use. While 90% of UK adults are aware that free debt support services exist, more than half have never used one. The barrier is no longer awareness, the report concludes, but factors such as fear of online scams, difficulty using phone based services, and uncertainty about whether the help is meant for them.

There are early signs of progress. The proportion of people who feel locked out of the financial system has fallen from 29% to 26%, the first improvement in four years, and average loan interest rates have eased from 24.7% to 22.7%. These shifts in the mechanics of the system, the report argues, have not yet changed how exclusion is actually experienced

Lindsay Smart, Head of Sustainability and Product at Triple Point, said “This year’s findings show that financial precarity is no longer confined to the margins. It is reaching people on living wage salaries who are turning to credit simply to cover the essentials, and that should concern everyone with a stake in the health of the UK economy.”

James Pursaill, Chief Executive of Plend, said “Five years of this research tell a consistent story. The rules of the credit system may be easing at the margins, but the lived experience of exclusion has barely shifted. Millions of people who are entirely creditworthy are still being turned away because the traditional system was never built with them in mind. Open banking changes that by assessing real financial behaviour rather than an outdated score.”