Cost of living remains most common reason for debt among new StepChange clients

With the Bank of England today revealing a net rise of £1.1 billion in consumer credit lending in August as well as £6.1 billion net mortgage lending, StepChange Debt Charity’s latest client data report shows that, even before the uptick in recent financial uncertainty, the cost of living continued its upward trajectory as the most commonly cited individual reason for debt among people seeking help, with 22% of those contacting the charity in August saying it was a reason for their difficulty. This is in contrast to the usual reasons for debt, which typically relate to a loss of income.

StepChange also reports that there was a sevenfold increase in the number of people using its online benefits checker in August compared to July – although this was driven, in part, by an active push to around 97,000 existing clients to remind them about this useful tool. Of 11,000 people who used the benefits checker as a result of the email campaign, 6,500 found that the check identified potential eligibility for benefits they were not claiming.

Around 340,000 people visited the StepChange website in August, and over 15,000 completed full debt advice, with 76% of these completing advice online and 24% by telephone (and people can switch between the two options when needed during the advice journey).

In line with recent trends, nearly two thirds (62%) of new clients were women. Two in five (41%) clients were single without children, and around a quarter (24%) were single parents. Around two thirds were renters, evenly split between private (33%) and social sector (32%). Almost one in five (18%) were homeowners, with the vast majority of these being mortgage holders. Four in five (81%) clients were aged 25-59.

The most common debts held by clients were credit cards (64%), personal loans (46%), overdrafts (33%) and catalogue debt (32%). Payday loans or other high-cost credit were held by 10% of clients.

The most common arrears on essential bills among those clients who had a responsibility for each type were council tax (31%), electricity (30%), water (27%) and gas (25%). Since last August, there has been a decline in the proportion of clients with rent, council tax and water arrears but a rise, unsurprisingly, in those with electricity and gas arrears.

Peter Tutton, Head of Policy, Research and Public Affairs at StepChange, said:

“The debt situation worsened in August, so the announcement of the energy price freeze was met with a degree of relief. However, it still leaves many households significantly more stretched than they were a year ago, and vulnerable to panic borrowing to try to fill the gap between their income and their essential spending. Now, financial market turmoil also opens up an increasing risk for mortgage holders, who in recent years have been far less likely than tenants to experience problem debt, but who will feel the brunt of any sharp rise in rates.

“Our advice for anyone looking ahead and worrying about future affordability is to go through a good budgeting process now, and to research the options that might be available to help. Advice from a trusted organisation like StepChange can help you explore your options and work out a sustainable way forward.”