Laura Suter, head of personal finance at AJ Bell, comments on the latest figures from the Bank of England on the cost of living crunch:
“It has occupied the headlines for months but we’re now seeing the real impact of the cost of living crisis on people’s finances. Across the country almost a quarter of people said it was difficult or very difficult to pay their usual household bills at the moment. But this rises to a third of people in the most deprived areas who are struggling to pay their bills, a large leap from a quarter of people who were struggling in November.
“This is largely driven by the soaring price of energy bills, with four in 10 people saying they are finding it hard to pay their gas and electricity bills. However, in reality these figures will be far higher now because the survey was carried out before the latest hike in the energy price cap at the start of April. It means that many more families will be struggling to meet these bill costs now and falling into arrears or borrowing to pay the bills.
“But it’s not just household bills that are rising, renters are seeing their costs hiked too. A third of renters said they’d seen their rent increased in the past six months, and it means that four in 10 say they are now finding it hard to pay their rent each month. This is particularly worrying as on average renters have less financial resilience than people who own their own home, and so are more likely to have to fall back on borrowing or fall behind on their rent payments.
“So far, lots of people have been able to dip into their savings to help pay for rising costs, which means that there hasn’t been a dramatic increase in the number of people borrowing more money since the last survey, in November. However, those who had already taken on debt will have had to borrow more and we’ll undoubtedly see more people turning to debt in the coming months as their pandemic savings run dry.
“Anyone struggling to meet the cost of their basic bills or housing costs needs to take action now, as the cost of living crisis isn’t going away any time soon. We’re facing another increase in energy bills later this year and expected further rises to the Base Rate means that housing and borrowing costs are also likely to jump.
“Budgeting might seem boring but it’s essential for anyone who finds themselves in a financial squeeze. It’s important to know what’s coming in vs what’s going out so you can work out whether you’re spending more than you earn and where you can make cutbacks. Anyone who is falling behind on their bills should also check what help may be available to them, from grants from local councils to additional benefits they might not be claiming or a temporary reprieve from energy bills. Contacting your local council or an organisation like Citizens Advice can be a good place to start.”