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UK household finances are strong in the face of inflation and rising spending

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British households are expected to see their financial resilience wane this year, amid rising consumer spending, inflation and higher interest rates, according to a report that predicts Britons will tap into the cash accumulated during the pandemic.

But the drop will still leave the average household in a stronger financial position than before the Covid-19 strike, according to forecasts from Oxford Economics, backed by investment platform Hargreaves Lansdown.

The average level of resilience, which fell from 54.5 in 2019 to 57.7 in mid-2021, will drop to 56.2 at the end of 2022, says the report, which brings together 17 indicators on household finances, including data on savings, debt, retirement and life insurance.

However, the aggregate figures mask strong differences between the wealthiest households, which are able to spend the money saved during the pandemic by cutting vacations and leisure activities, and the poorest homes, which remain under pressure. financial, said Oxford Economics.

In mid-2020, the resilience barometer reading for low-income households was only 41.7 compared to 69.2 for high-income households. Young people are far behind the oldest, with a score of 47.1 for Generation Z against 60.8 for baby boomers.

As the authors have said, all income groups are going into debt. But the poor have less control over their borrowing: more than 15 percent of low-income households are behind on (non-mortgage) repayments, more than four times the national average.

Less than half (41.2%) of families have enough assets and life insurance to cover mortgage debts and future living expenses for children in the event of the primary income recipient’s death, the authors said. Among single-parent households, this figure is only 16.6%.

More generally, a third of the UK does not have enough savings to cover three months of essential expenses, with the self-employed appearing to be particularly vulnerable, the research group said. The self-employed also have smaller pension funds, although they tend to have slightly higher levels of home ownership and overall household wealth.

“If we are serious about improving financial resilience for all, we need to make saving and investing a daily activity for everyday people,” said Chris Hill, Managing Director of Hargreaves Lansdown.


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