In too deep?

Hard economic times and rising interest rates have brought a renewed focus on household debt in recent years, with concerns that more and more families could find themselves overwhelmed by the burden of debt. So this briefing note takes a closer look at the use of consumer debt (such as credit cards, personal loans and overdrafts) through the pandemic and cost of living crisis.

We find that there is certainly some good news: despite the financial pressures of the past few years, British families today have less consumer debt relative to their incomes than at any point since records began. That means, despite rising rates, households are now spending a smaller share of income on consumer-debt repayments than before the pandemic. However, partly in response to restricted access to consumer debt, there has been a rise in the number of households falling behind on priority bills like gas and electricity. This highlights the pressing need to boost saving and help families build up the financial resources they can draw down on in tough economic times.