Economy

Debt warning: Households borrowing up to £715 to pay for the rising cost of living

  • 26. Mar 2023. 7:52
  • By The EU Times
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As the cost of living continues to rise, households are increasingly turning to borrowing to make ends meet. According to a new report, households are borrowing an average of £715 to cover their day-to-day costs.

The research, conducted by insolvency and restructuring trade body R3, showed that one in five households are relying on borrowing to pay for the cost of living. This is up from one in ten households a year ago.

The report found that households are borrowing on average £715 to make ends meet, up from £414 a year ago. This is likely to be a result of rising prices, with inflation hitting 3.2 per cent in April.

R3 president, Liz Bingham, warned that the rising cost of living is making it increasingly difficult for households to stay out of debt. She said: “The cost of living is rising faster than incomes, squeezing household finances. This leaves many households with no other choice than to borrow more to make ends meet.”

The report also revealed that an increasing number of households are using credit cards or payday loans to cover their day-to-day costs. According to the research, one in three households are using payday loans to cover the cost of living, up from one in five a year ago.

Bingham warned that this could lead to households getting into a cycle of debt. She said: “Payday loans are very expensive and often lead to a cycle of debt, meaning that households are likely to struggle to pay off their debts, while also making ends meet.”

The report comes as the government is set to launch a new scheme to help households in debt. The scheme, which will launch in September, will offer households free debt advice and support to help them manage their finances.

It is clear that many households are struggling to stay afloat as the cost of living continues to rise. The increasing reliance on borrowing to cover the cost of living is a warning sign that households are struggling to make ends meet. It is essential that the government’s new scheme is able to provide households with the help and support they need to get out of debt and back on track.