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22
JUL
2011

Over six million households vulnerable

Over six million UK households have been identified as being financially vulnerable according to research commissioned by the Consumer Credit Counselling Service (CCCS).

The Debt and Household Incomes report found that 3.2m households are already in financial difficulty, either three months behind with a debt repayment or are subject to some form of debt action such as debt management, Individual Voluntary Arrangement, Trust Deed, Low Income Low Asset, Debt Relief Order and bankruptcy.

A further three million are at risk of financial difficulty because they are finding it hard to make ends meet and are vulnerable to increases in household bills such as food and energy.

Unsuprisingly those on low incomes and with either little or no savings were identified as the most vulnerable and researchers found common issues among this group.

Among these were a risky dependency on credit for low-income households. CCCS clients earning up to £13,500 a year typically had unsecured debts totalling 20% more than their annual income.

This is significantly higher in households earning between £25,000 and £50,000, whose average debt was 95% of annual income.

Lower to medium and medium to higher income households also struggled to manage debt, with more than a third of CCCS clients earning between £13,500 and £25,000 had no money left at the end of the month to repay their unsecured debts.

Lord Stevenson of Balmacara, chairman of CCCS, said: “Unfortunately, these figures confirm our fears – that troubled times lie ahead for many people in the UK. What this report shows is that the pain is going to spread wider and affect many more people than many commentators have previously assumed.”

The report also found that more than 759,000 mortgages were in some form of forbearance, meaning the total number of mortgages in arrears, in possession or subject to forbearance is currently 1.2m, nearly 11% of all total outstanding mortgages.

This left 50% of the lowest-income households already in deficit, a position that would be greatly exacerbated by a rise in the base rate of interest.

Gavin Kelly, Resolution Foundation chief executive, said: “Many people who scraped through the recession are going to find the next few years even harder. It is very likely that there will be a significant rise in the number of households struggling to maintain their debt repayments, which is a major concern both for them and the wider economy.”

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