Millions default on household bills as cost of living crisis worsens
Millions of households failed to pay their bills in January, as families struggled to manage their cash after Christmas.
Around 2.3m households defaulted on at least one mortgage, rent, loan, credit card or household bill payment in January, up from 1.9m in December, research from the consumer campaign group Which? found.
It estimated that more than 16 million households had to make at least one change to their normal finances last month, such as cutting back on essentials, dipping into savings or selling possessions.
There is typically an increase in the number of bill defaults in January, but Which? warned that persistently high inflation was stretching household finances to the extreme.
The poorest households have experienced the biggest increase to their bills, it found. For the bottom income quintile, where the average annual earning was £15,287, the “lived rate of inflation” was 11.5pc in October.
Meanwhile for the highest earning quintile, where the average salary was £83,004, it was 8.6pc. It represented the biggest effective inflation gap since Which? started collecting the data in 2016.
Single parents and pensioners were among the worst hit, it found, as they spent a greater proportion of their budget on food, energy and fuel, the key drivers behind high inflation.
Food inflation hit a record high of 13.8pc in January, according to the British Retail Consortium trade body. It found that the cost of fresh food had climbed even faster, at 15.7pc.
Rocio Concha, of Which?, said: “As the cost of living crisis continues to bite into household finances, we are calling on businesses in essential sectors – like food, energy and broadband providers – to do more to help customers get a good deal and avoid unnecessary or unfair costs and charges.”
A rising number of people have turned to credit cards to help pay for their bills. The annual growth rate for credit card borrowing rose from 12.2pc in November to 12.4pc in December, according to data from the Bank of England.
However, the cost of borrowing has also increased. The effective interest rate on interest-bearing credit cards rose to 19.6pc at the end of last year, from 19.2pc in November.