Today’s Money and Credit data from the Bank of England shows an increase in mortgage borrowing, while household borrowing increased £1.2 billion in July following four months of net repayments. This may point to the underlying financial pressures many UK households are facing, which will crystallise into serious debt problems when unemployment support measures and payment holidays end, according to data from StepChange Debt Charity.
Since May, StepChange has been publishing a monthly breakdown of client trends to try to understand how the pandemic is affecting household debt, and to help focus on the best ways of helping people who are affected. In July, the charity gave full advice to around 14,000 clients – a number that remains artificially suppressed by the support mechanisms that remain in place. However, a particularly notable feature of the July data is the unmistakable trend toward greater worries about unemployment.
Not only has the proportion of clients who are unemployed increased, but searches about redundancy on the charity’s website saw a massive 1800% increase in July compared with June. Yet the 16% of clients citing coronavirus as a reason for their debt includes a higher of proportion of people who are currently employed than the charity average, suggesting that employment is not a guaranteed protection against financial difficulty caused by the pandemic.
Commenting on the Bank of England’s data, StepChange Head of Policy, Research and Public Affairs Peter Tutton said: “For the first time in some months we are seeing household borrowing outstrip repayments, at a time when emergency support measures are winding down. It’s absolutely vital that we see ongoing support to help people get through the next period, whether they are in employment or not, if we are to avoid entrenching problem debt as a long-term legacy of the pandemic. We’re seeing young people, single parents and those already on low incomes being disproportionately affected – it’s important the Government doesn’t leave them even further stranded during the next phase of managing the crisis.”