After prices began soaring to record levels in the UK at the end of 2021, the government stepped in to help ease the squeeze - not only with universal support such as energy bill discounts but also payments targeted at the most desperate.
Here, we delve deeper into the findings of our study and reveal the vulnerable groups falling through the gaps when it comes to cost of living support.
Pain is not felt equally
Which? surveyed 4,000 people across the UK to discover how the cost of living crisis is affecting UK households. We found that not everyone is feeling the pain of the crisis equally and identified six groups of consumers, based on how they are coping financially, physically and mentally.
The ‘Drained and Desperate’ group have found themselves at the sharp end of the cost of living crisis, being more likely to have household incomes of less than £20,000 and already having had to make severe financial cutbacks, such as skipping meals and not turning on the heating.
This year the government has targeted help towards these vulnerable households in particular, offering a series of one-off payments to means-tested benefits claimants and some disabled taxpayers. But our study found another group at risk of falling into financial hardship has been largely overlooked when it comes to support measures, outside of universal help to pay energy bills.
The so-called ‘Anxious and At Risk’ group comprises 7.9 million adults - that’s 15% of the UK population. They tend to be from larger households with children at home and are struggling financially but have just about managed to keep afloat by using credit.
Find out more:Growing debt
Unlike the Drained and Desperate group, the Anxious and At Risk are more likely to have borrowed money to maintain basic living standards than to have cut back on essentials, such as food and energy.
We found that six in 10 have increased their debt in the past six months - the highest among all groups. They are also more than twice as likely (36%) as the UK population (14%) to have used buy now pay later (BNPL) schemes.
Another major concern is the impact rising interest rates will have on this particular group, four in 10 of which we found have a mortgage or loan on their home.
The Bank of England has increased the base rate 13 consecutive times since December 2021. It currently stands at 5% but economists predict it will rise even higher this year. That will be dire news for the 21% of Anxious and At Risk mortgage holders who have variable tracker products and see interest rise or fall in response to base rate changes.
Find out more:‘A ticking time bomb’
Rocio Concha, Which? director of policy and advocacy, said: ‘Our research reveals that almost 8 million people have been left balancing on a financial knife-edge.
‘Until now, the government and policymakers have rightly focused on supporting the millions who are already failing to make ends meet, but this "Anxious and At Risk" group is a ticking time bomb. They are far more likely to have relied on borrowing to make ends meet but with interest rates continuing to rise, it’s only a matter of time before they find themselves facing serious hardship.
‘The government must help those most in need by tightening regulation on buy now pay later to stop unaffordable lending and ensuring essential businesses are doing everything in their power to ease pressures on household finances.’
Get further help with the cost of living
source https://www.which.co.uk/news/article/cost-of-living-crisis-8-million-households-on-financial-cliff-edge-a2YUE0r2UVfC