Today’s new lending data from the Bank of England, while showing a continuing slump in the overall demand for credit, should not be taken as a reassuring sign that all is well in household finances.
Those households already indebted are in fact accumulating more debt in the form of missed payments and arrears, and our research suggests that since the beginning of the lockdown period around 4.2 million people have borrowed to make ends meet, most often using a credit card (1.7 million), an overdraft (1.6 million) or a high cost credit product (980,000).
Director of External Affairs here at StepChange Richard Lane says:
“The economic effects of coronavirus are amplifying the problems for poorer and more financially vulnerable households, which is the worrying aspect that the aggregate data doesn’t show.
"Our research suggests that around a quarter of all households have been negatively affected financially, and that over £6 billion of debt directly attributable to the pandemic has been built up among over 4 million people.
"It’s crucial that public policy recognises the need for exit strategies that give those affected a safe way out of financial difficulty.”