Even higher earners are facing “dangerous debts”
Dangerous debts are on the rise, personal finance analysts have warned, as new Hargreaves Lansdown data shows that a third of people have poor or very poor debt resilience.
Figures from the HL Savings & Resilience Barometer third wave, conducted in January 2023, found that higher earners are more likely to score poorly for debt resilience than lower earners.
38 per cent of those in the fourth quintile, who earn more than three fifths of the population, have poor or very poor resilience, the research found.
Read more: Consumer debt rose by a third in 2022
“This group are less likely to be borrowing because they feel on top of their ability to repay – and more likely to borrow because they don’t feel they have any other choice,” Hargreaves Lansdown said.
This compares to 32 per cent among the second and third quintiles, who only make more than the bottom fifth of earners.
The lowest earners in the country face debts of another kind, the study said.
Read more: How to boost your income during the cost-of-living crisis
Those on the lowest incomes and people with high amounts of existing debt are likely to find it more difficult to get credit cards or loans as banks rein in their lending.
The fund supermarket’s research cited official statistics which showed that a growing number of people have started missing bill payments instead. Eight per cent of people had a direct debit, bill or standing order they’d been unable to pay in the previous month, which rose to 10 per cent of those aged 16 to 29, and an alarming 13 per cent of those aged 30 to 49.
Read more: Young people turn to personal loans to cope with cost of living
“Dangerous debts are on the rise,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“After more than a year of desperately trying to keep up with runaway prices, millions of us are running out of road. The HL Savings & Resilience Barometer reveals that debt is becoming a serious threat, and while higher earners tend to carry a bigger debt burden, lower earners are struggling too.
“Typically, the lion’s share of debt is owed by wealthier people, who tend to borrow more. They may feel more comfortable owing more money, because they’re confident their income will cover the cost. However, even those with plenty of wiggle room in their budgets shouldn’t be too keen to take out more credit, because the last few years has revealed just how easy it is to be caught out by the unexpected.”
Hargreaves Lansdown’s findings come as MoneyPlus Advice reported a significant increase in enquiries for debt help this month so far.
The UK debt advice provider has seen a 353 per cent rise in initial enquiries, compared with the same period last year.
Over the last six months, the number of people citing the cost of living as their main reason for financial difficulty has more than tripled, MoneyPlus Advice said.