StepChange sees “startling” rise in demand for debt advice

More than 18,000 new StepChange Debt Charity clients completed full debt advice in January 2023, which is at least 22% higher than any single month in 2022, suggesting that more and more people are struggling with debt in the new year following almost 12 months of rising living costs. Meanwhile the Bank of England’s Money and Credit data for January released today, shows consumers borrowed an additional £1.6 billion in consumer credit, on net, compared with £0.8 billion borrowed in December.

While StepChange always sees a seasonal uptick in client volumes in January, the increase this year is markedly higher than in previous years. The number of clients advised in January 2023 increased by 77% compared to the previous calendar month. Comparatively, between December 2021 and January 2022, the number of new clients advised increased by 48%.

The charity has also seen a further increase in the proportion of new clients citing the cost of living as their main reason for debt. A quarter (24%) of clients cited an increased cost of living as their main reason for debt, which is the highest this proportion has been, and nearly three times what it was in January 2022 (9%).

For the first time in several months, the proportion of clients with unsecured debts such as credit cards is on the rise. Between December 2022 (63%) and January 2023 (67%), there was a four-percentage points increase in the proportion of clients with credit card debt. Between the same time period, there was a two-percentage point rise in clients with debt from personal loans which stands at almost half (46%). However, these figures remain slightly lower than January 2022.

While StepChange always advises a higher proportion of women than men, in January 2023, 65% of new clients advised were women, up from 62% in December 2022.

Richard Lane, Director of External Affairs at StepChange Debt Charity, said:

“In January we saw startling demand for debt advice – our highest client volumes for the charity since well before the pandemic, which may suggest that problem debt triggered by a year of rising prices is beginning to take hold. Today’s Bank of England figures suggest that consumer borrowing is on the rise, while energy bills remain high, and mortgage holders and renters alike are facing the ongoing impact of high interest rates. There’s only so much people’s finances can cope with, particularly for those on low incomes, and with financial resilience waning, more people may be forced to turn to credit to make ends meet over the coming months.

“We’re two weeks away from the Spring Budget, and we’re calling on the government to step up to protect those at risk of falling into severe financial difficulty. A starting point would be to scrap the proposed rise in the energy price cap and to end unaffordable deductions from benefits to repay debts, which can be a cause of real hardship for those on the lowest incomes. We’d also like to see the £1 billion Household Support Grant made permanent to provide an effective system of local crisis support for households facing financial difficulty.

“With suggestions that inflation could go down later this year, we’re hopeful that the burden on household finances may start to ease. However, events of the past year have taught us that external factors affecting the economy and people’s finances can be unpredictable, therefore there needs to be a robust system in place that protects financially vulnerable households from falling into problem debt due to circumstances outside of their control.”