Description
The “Financial Health Report: Affordability and Forbearance Subgroup” provides an in-depth analysis of the financial landscape in the UK following the cost-of-living crisis. It focuses on key trends in mortgage affordability, debt burdens, and financial resilience across different demographics. The report highlights the financial pressures faced by UK consumers, particularly in areas such as mortgages, energy costs, and personal debt, while also addressing gender disparities in debt repayment and savings. It aims to guide financial institutions in making smarter, data-driven decisions to support consumer financial health.
Key Take Aways
- Mortgage affordability crisis: 1.4 million people are facing a 50% increase in their mortgage payments, exacerbating affordability concerns.
- Energy and personal debt pressures: Energy costs have risen by 28%, and personal debt has increased by 4%, further straining household budgets.
- Decline in disposable income: UK consumers have experienced a 5.7% reduction in disposable income, while £18 billion in support remains unclaimed.
- Financial literacy gaps: 50% of UK adults are not confident in managing money, and 1 in 5 are experiencing poor mental health, indicating a need for better financial education.
- Rise in long-term mortgage terms: Over 36-month mortgage terms have increased by up to 10%, and 90,000 mortgages have been switched to interest-only.
- Over-55s in arrears: Older consumers are increasingly struggling with mortgage arrears, highlighting a need for targeted financial interventions.
- Credit card utilisation spike: Credit card balances are at 90% utilisation, with a 10% increase in usage, reflecting higher borrowing rates.
- Gender pay and debt disparity: Women, despite having 30% lower debt balances than men, take longer to pay off their debts due to the persistent gender pay gap.
- Buy Now, Pay Later (BNPL) surge: Average monthly BNPL payments per customer have increased by 21% compared to the previous year.
- Pension and savings gap: A 35% pension pay gap exists, and the savings gap for those aged 75 has grown to 38%, indicating long-term financial vulnerability.
- Single-parent financial challenges: 94% of single-parent households claiming Housing Benefit are headed by women, reflecting gendered financial pressures.
- Low literacy as a barrier to financial health: 1 in 6 adults in England have very poor literacy skills, which hampers their ability to engage effectively with financial products.
Innovation
- Data-driven decision-making: The report highlights the need to leverage smarter data analytics to improve financial outcomes for consumers and better assess their affordability.
- Inclusive financial services: Financial institutions are encouraged to offer more inclusive services by improving front-line staff skills and resilience, particularly in understanding and addressing consumer vulnerabilities.
- Empowering the next generation: The report calls for equipping the next generation with better financial literacy and skills to improve long-term financial health.
Key Statistics
- 1.4 million people face a 50% increase in mortgage payments.
- 28% rise in energy costs and 4% increase in personal debt.
- 5.7% decline in disposable income across UK households.
- 90,000 mortgages have been switched to interest-only terms.
- 10% increase in credit card usage with 90% utilisation.
- 21% increase in average monthly Buy Now, Pay Later payments per customer.
- 94% of single-parent households claiming Housing Benefit are headed by women.
- 1 in 6 adults in England have poor literacy skills.
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