Brits face “tough decisions and sacrifices” as inflation bites
British consumers are poised to increase personal debt levels because dwindling savings will not see them through the cost-of-living crisis, an investing trade body has warned.
The Investing and Saving Alliance (Tisa) commissioned a survey of 2,000 people which found that more than a fifth of Britons have less than £1,000 in savings.
The research found that over 55s are becoming more likely to access their pensions earlier than anticipated in the coming months, due to the crisis.
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“The current cost of living crisis is having a profound impact on all but the most wealthy UK consumers,” said Tisa’s head of retirement, Renny Biggins.
“Along with the need for some tough decisions and sacrifices, for many this will also result in taking on or increasing personal debt and/or tapping into pension wealth.”
This latest poll is further evidence of how consumers are struggling to manage their financial pressures amid mounting inflation.
At the end of August, the Bank of England published data showing that the annual rate of credit card borrowing had risen by 13 percentage points in July, compared to the same period in 2021. Commentary accompanying the BoE statistics confirmed that this was the fastest annual rise in 17 years.
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In July 2022 alone, Britons borrowed an additional £1.4bn. This followed £1.6bn of borrowing in June.
In an interview with Peer2Peer Finance News, Jazz Jhumat, a financial adviser at Manchester-based JJFS, said that she is having frequent conversations with clients about their increasing borrowing needs, irrespective of their profile.
“From high-net-worth investors to first-time buyers, clients are looking for assistance,” she said. “Borrowing will increase without fail. If the Bank of England has an emergency meeting anytime soon, it is possible that rates may even go up sooner than their next scheduled meeting.
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“I have clients who were renovating their properties and the cost of labour went up, materials went up and they have ended up maxxing out on every credit facility available. The only way out is to consolidate all the unsecured debt on to their mortgage, usually at a much higher rate than they first envisage.
“I also have clients looking to consolidate credit cards and secured debt onto their mortgages which is going to prove more costly over the longer term. Some of them are still concerned how they are going to maintain monthly costs for everything else.”
Read more: Consumer borrowing booms as savings shrink