Debt problems hit record high

7th September 2016

New Research from StepChange has found that the number of people seeking help with debt problems has hit a record high with those affected increasingly likely to be younger, working part-time and renting their home. The charity’s Statistics Mid-Yearbook, released today, shows that over 300,000 people sought advice from StepChange Debt Charity between January and June, the highest half-year number the charity has ever seen.

Those contacting the charity in the first half of the year were struggling with a total of £2.4 billion in unmanageable debt and owed an average of £13,826 each, with credit cards, overdrafts and personal loans the most common source of debt problems. Three in ten of those contacting the charity did not have enough money to pay their essential bills and credit commitments each month.

The figures show some respite for struggling households after the number in arrears on essential bills like rent, mortgages, utilities and Council Tax had stabilised after years of substantial increases. But the charity is warning that 40% of the people it sees are not able to meet essential bills, a number that remains well above the long-term average.

More StepChange Debt Charity clients are now in work than at any point since 2011. However, the charity’s clients are increasingly in insecure part-time work and less likely to be in full-time employment. Almost one in five (19%) are now part-time workers, up from 16% in 2011, whereas 30% of the charity’s clients are in full-time work, down from 34% in 2011.

The charity’s previous research has warned that the rise in zero hours, part-time and temporary contracts is contributing to people’s financial vulnerability, with volatile incomes making it difficult to get by and cope with sudden unexpected expenses.

The charity is reporting a dramatic increase in the proportion of people in debt who rent their home, with amounts owed also rising rapidly:

  • 77% of clients are now renters, up from 55% in 2011
  • 24% of the charity’s clients who rent are in arrears, up from 15% in 2011
  • The average rent arrears now stands at £954, up from £769 in 2011, an increase of 24%.

When people are struggling with debt, they already face a battle to keep up with essential bills. As rents continue to grow faster than wages, it can leave them even more financially vulnerable.

The average age of people approaching StepChange Debt Charity has fallen during the last five years, with more clients aged between 25-39 and a steady rise in under 25s. The result is that 59% of the charity’s clients are now under 40, up from 51% in 2015.

Younger people, particularly those under 25, are more likely to be renters and have insecure jobs, which leaves them more vulnerable to problem debt. They tend to have smaller debts however, in part because they have had less time to access credit and usually have lower salaries.

Two in every five people that come to the charity owe money on essential bills such as rent/mortgage, utilities and Council Tax, unchanged from 2015. The figures also show that 29% do not have enough money in their budgets to meet their essential outgoings and credit commitments. Overall, the average StepChange Debt Charity client has just £58 left toward repaying debts, averaging £13,826, after all of their monthly outgoings are accounted for. 

Clients are still struggling with traditional mainstream products and credit cards continue to top the list, 67% of people reported an average of £8,078 outstanding on plastic, with overdrafts (53% and £1,679) and personal loans (44% and £8,657) the next most common.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said: “These figures paint a worrying picture of the reality of problem debt across the UK.  Too many of our fellow citizens are struggling just to make ends meet. Problem debt costs the UK £8.3bn[2] in external costs like additional healthcare spending and lost productivity. Problem debt is bad for your health, your relationships and the economy. Debt is a serious issue for people who are working as well as for those who are not. If we are to help people and their families get back on their feet and contribute to a growing economy, the Government needs to take the issue of personal debt seriously. 

“The Government has said that it will review proposals that would see people seeking debt advice given ‘breathing space’ – time during which interest and charges would be frozen and enforcement action halted whilst people try to get back on their feet. The increasing numbers of people seeking our help shows that people who are struggling need help and the Government must now take action which is long overdue.”

More graphs and statistics from the Mid YearBook can be found here.