Household debt pressures mount as housing costs soar

The UK’s ongoing cost-of-living crisis remains significant, with new figures revealing a sharp rise in housing costs and debt levels, according to research by Money Wellness.

The data, which tracks household finances from the fiscal year 2023/24 to the first quarter of 2024/25 (prior to April’s price increases), shows that ,ortgage payments have surged by 39.1%, rising from £728 to £1,013 per month. Renters are also feeling the pressure, experiencing a 14.3% increase, which raises average monthly rent from £571 to £653.

Household debt has risen by 21.1%, with the average debt burden growing from £10,383 to £12,575. Buy Now Pay Later (BNPL) debt has more than tripled, increasing from 1.2% to 3.8%, indicating that more households are relying on short-term credit to cover essential expenses.

Utility bills continue to rise, with average water costs up by 24.4% and gas and electricity bills climbing by 6.4%. While income has increased by 11.2% (from £1,761 to £1,959), household expenditure has jumped by 9.4% (from £1,746 to £1,910), leaving households with little extra financial flexibility.

Although some improvements have been made, such as a decrease in mortgage arrears from 27% to 22% and a drop in energy arrears from 49% to 33%, these figures mask the deeper financial pressures facing UK households.

Many are managing to stay afloat only by borrowing more, which may lead to more significant financial difficulties in the future.
Importantly, these figures do not account for the additional cost increases that took effect in April, such as council tax rises, mobile and broadband fee hikes, and higher food and fuel costs alongside rises in energy and water bills.

The next 12 months will likely be particularly challenging for millions of households that cannot absorb further price increases. Without intervention, many could struggle to meet even their basic living costs.

Sebrina McCullough, Director of External Relations at Money Wellness said “The data shows some positive signs; support schemes for mortgage and energy bills seem to have helped, as arrears in these areas have decreased.

“But this doesn’t mean households are thriving. Many have simply adjusted to higher costs by cutting back on other expenses – whether by reducing their grocery shopping, using less heating, or skipping social activities altogether. We’re seeing people fall behind on priority debts like council tax, and many are increasingly turning to credit just to cover essentials. Without further action, these financial pressures will continue to grow.”