As the cost of living persists across the UK, an increasing number of people are turning to credit to pay their bills. However, new research suggests that access to credit is worsening – with many believing that the responsibility should fall on brands to support people.
11.5 million, or 39 per cent of financially vulnerable people, have no option but to turn to credit to afford everyday expenses, new research from AI-powered transaction analytics firm, Fuse, has found. Meanwhile, Fuse reveals that 28 per cent remain reliant on credit to pay for their mortgage or rent.
With rent prices predicted to rise yet again by another six per cent and 1.6 million people’s fixed-rate mortgage deals expiring in the next 12 months, many will see their monthly repayments rise. In light of this, UK Finance predicts that UK lending for house purchases will drop by eight per cent and that more people will accrue arrears in 2024.
Though the FCA’s Consumer Duty rules were introduced in mid-2023 to ensure improved financial outcomes for consumers, one in five (19 per cent) believe that their bank is responsible for getting them into debt.
With the situation looking dire for many, media agency UM found that seven out of ten UK adults believe brands should play a key role in helping them navigate the cost-of-living crisis, while 57 per cent also feel that brands could do more to help consumers.
Retail and finance scored highest when people were asked which sectors featured brands are most helpful when it comes to the cost of living – yet in each case, only 25 per cent believe they do enough.
Twenty-three per cent of consumers feel utility brands are doing enough to help them, but automotive and property businesses ranked lowest, with a mere 13 per cent of respondents suggesting they were offering enough support.
Doing more to protect borrowers
Fuse is now calling for lenders to offer more effective support to borrowers. Enhancing affordability measures by utilising enhanced insights and data can help lenders predict changes in affordability, probability of default, and even financial vulnerability levels before they occur.
Sho Sugihara, CEO and co-founder of Fuse, explains the significance of this as access to credit reduces: “We are living in an increasingly volatile economic climate and the financially vulnerable are in danger of being left behind as the UK’s financial gap continues to widen.
“Many people are solely reliant on credit to pay for everyday expenses and in some cases, keep a roof over their heads. However, it is hugely concerning that access to affordable credit options is plummeting at the exact moment when reliance on credit is spiking.
“The entire financial sector, not just banks, could be doing more to protect borrowers – but there needs to be better support solutions. Embracing technology and AI-led insights assists lenders during affordability testing to ensure not only more accurate credit decisions but also more personalised, effective support solutions – a vital step in creating a more inclusive financial system with improved outcomes, especially for financially vulnerable borrowers.”
Mental health concerns
The cost of living crisis’ impact on mental health is also not to be understated, explains Kim Lambert, group insights director at UM: “We’re already seeing a shift in how, when and where people shop due to the financial downturn. The mental health impact of those pressures is perhaps not as obvious, but as this study underlines it can be even more impactful.”
In response to the wider research findings, mental health charity CALM and MoneySuperMarket have launched the Money Talks report to support the campaign to help overcome the taboo of talking about financial concerns.
The research found that 86 per cent of UK adults worry about money, with more than a fifth reporting feelings of reduced self-worth (22 per cent), inadequacy (23 per cent) and hopelessness (22 per cent) over their current financial situation. However, 75 per cent said they have not spoken to anyone about their money worries. In addition, 51 per cent said they wished the stigma attached to talking about money didn’t exist.
Lis Blair, chief customer officer at MoneySuperMarket, added: “The Money Talks campaign aims to break the taboo of talking about money worries and help as many people as possible get the support they need.”
