A £50 Rise In Monthly Costs Would Push A Third Of Brits To Financial Breaking Point

Friday, 24 August 2012

One in five adults say their finances are now so stretched they have reached their 'Affordability Tipping Point' 

SSE price hike and Santander SVR rise could push Brits further into the red 

Nearly half of Brits relying more on credit to make it through the month 

80 per cent of households now on a budget regardless of income bracket

With the news thousands of households will be struck with price rises across their mortgage repayments and utility bills, many UK homeowners could be pushed over the edge of their 'Affordability Tipping Point'.

Household finances in the UK are now so stretched that over a third of the adult population (36 per cent) believe a rise in monthly outgoings of £50 or less would push them to financial breaking point. Of these, one in five say they are now sitting on the brink, finding it impossible to meet their monthly bills and costs.

The figures are taken from the MoneySupermarket.com Affordability Tipping Point research, which measures the 'pounds and pence' point at which household outgoings rise to overtake income. The report also reveals that Brits have, on average, seen their household outgoings rise by £56 a week over the last six months, suggesting that this £50 monthly 'tipping point' limit could literally be just around the corner for millions as the cost of living continues to rise.

The credit creep - While many Brits are cutting back where they can, the report shows that 44 per cent of adults have increased their use of credit over the last year to help them make it through each month.  A quarter of adults (24 per cent) say they have relied more on credit cards and 17 per cent have turned to authorised overdrafts to help them meet regular household outgoings, while 13 per cent have relied on hand outs from friends and family.

Budgeting nation - According to the research, the majority of households in the UK (79 per cent) are now on a budget irrespective of demographic, income bracket or family set up. Just under a third of adults (30 per cent) said the rising cost of food has been the biggest pull on their purse strings, up from 23 per cent in 2011.  A quarter of adults (25 per cent) said the rising cost of utility bills has had the biggest impact on their budgeting up from 19 per cent in 2011. 

To save money, more than four in ten (41 per cent) adults have reduced their spending on new clothes this year - up from 37 per cent in 2011. Additionally 37 per cent of adults have put bigger purchases, such as household appliances and cars, on hold. 

Salary pressure - Compounding this squeeze on outgoings is the battle to hold onto current salaries or increase them in line with inflation. While many people have not seen salary increases for some time, just over one in ten (12 per cent) have been forced to take a pay cut in the last 12 months, according to the figures.

Clare Francis, personal finance expert at MoneySupermarket.com said: "The fact a rise in outgoings of £50 or less would tip a third of Brits to 'financial breaking point' speaks volumes about how difficult people are finding things at the moment. We have just learnt that millions of SSE customers will see the price they pay for gas and electricity rise by a wallet-busting £116 a year, while thousands of borrowers paying Santander's standard variable mortgage rate could see their payments increase by £42.54 a month from October. This coupled with the fact that many already admit to using credit more than they normally would to get them through each month, paints a worrying picture. 

"As news of rising costs continues to hit consumers, all the signs suggest that 2012 is set to be another tough year for many households with finances continuing to be pushed to the max. My advice to those in this situation is to sit down and make a plan!  Review all of your outgoings to see where you can get better value and free up vital cash. There are significant savings to be made by switching to a better energy tariff for example, or making sure that you find the best deal when your car or home insurance is up for renewal. The savings can literally add up to hundreds of pounds over the course of the year, a great way of giving yourself a bit of breathing room."