Low-income households take on £12.5bn of new debt

The study involved surveying 4,000 people on low household incomes (the bottom 40%, which totals an income of below £25,000 for a couple with no children).

People on low-incomes have turned to borrowing as they have taken on £12.5bn of new debt in 2022, out of a total £22bn, it said.

It further found low-income households have, on average, fallen behind on payments by £1,600.

Credit has been used to cover essentials in 2022 by 1.3 million low-income households, or 11%. 

Over two million households said they were in debt to high-interest lenders like loan sharks or doorstep lenders – owing a total of £3.5bn to these. 

Joseph Rowntree said the Chancellor’s support package is welcome, but “doesn’t even touch the sides” when it comes to the actual difficulties low-income families face.

Arrears on all personal debt have more than doubled from £1.8bn to £3.8bn since October 2021. With interest rates rising, JRF expects these arrears will spiral.

Katie Schmuecker, principal policy advisor at the Joseph Rowntree Foundation said :“Our research illustrates the frightening year of financial fear low-income families are living through.

“Families up and down the country have been faced with options that are simple but grim – fall behind on bills, go without essentials like enough food, or take on expensive debt at high interest. In some cases they had to do all three.

“No one should be put in this precarious position. The hardship families are facing now builds on the foundations of a decade of cuts and freezes to social security. 

“The Chancellor’s cost of living support package will offer some temporary relief, but rather than lurching from emergency to emergency government must get ahead of this problem.”