There was a 20% increase in clients seeking debt advice or guidance with problem debt between 2021 (483,247) and 2022 (580,913), according to data from StepChange Debt Charity’s 2022 Statistics Yearbook.
Published today, the report reveals how the cost-of-living crisis is driving more clients with higher average debts and less disposable income to the charity, despite the average client earning more than they did a year ago.
The report found that the average unsecured debt per client increased by 25% from £11,176 in 2021 to £13,941 in 2022.
Additionally, one third (33%) of clients were in arrears with their energy bills in 2022, compared to 29% in 2021.
Clients’ average monthly income rose to £1,558 in 2022 compared to £1,434 in 2021.
Despite this, clients only had an average surplus of £73 to pay towards their debts each month in 2022, compared to £100 in 2021.
Meanwhile, the cost of living has been the singular most common reason for new clients’ debts since June 2022, with one in four (25%) citing it at the time of advice in February 2023.
In 2021 it was the eighth most common reason for debt, whereas by 2022 it was the second most common reason.
These cost pressures are the same that drove higher client volumes in 2022 and precipitated a shift in the profile of clients in need of debt advice.
On average clients earned more and a rising proportion – 56% – were in some form of employment in 2022, up by three percentage points compared to 2021 (53%).
Meanwhile average levels of mortgage arrears held by clients also shot up in 2022 to £5,751 from £4,497 in 2021, although the proportion of clients with mortgage arrears has decreased slightly since 2021.
StepChange says its client data serves as a warning that more and more people risk being dragged into problem debt.
With interest rates continuing to rise, wages failing to keep pace with inflation and energy bills set to remain well above their usual levels, the charity is calling on the Government to recognise the impact of this on struggling households.
StepChange has been campaigning for an end to unaffordable deductions from benefits to repay debts and wants to see the introduction of a social tariff on energy bills to help low income households to cope.
Richard Lane, director of external affairs at StepChange Debt Charity, said: “Looking at our client’s debt situations in 2022, and seeing how client volumes continue on an upward trajectory into 2023, it’s clear that without further intervention from the Government, more and more people will face a battle to keep their heads above water.
“This is not just people on the lowest incomes, our stats show that this crisis is sweeping middle earners into hardship too.
“It can’t be underestimated the damage that has already been done to people’s finances, with significant arrears built up on household bills, and many mortgage holders and renters facing steep increases in housing payments.
He added: “Energy bills are still overwhelmingly higher than they were a year ago, and despite government help, these simply aren’t manageable for thousands of households.
“We’re calling for targeted funding to write-off arrears for people who simply cannot afford to repay.
“Looking further ahead, a social tariff for energy would act as a long-term solution to protect financially vulnerable households from debt and fuel poverty.
“This crisis is hitting those on the lowest incomes the hardest, and will do for years to come unless tangible support is put in place to stop problem debt from escalating.
He concluded: “We’ve long been calling for an end to the unaffordable deductions from benefits to repay debts, which continues to put immense pressure and financial hardship on people with the least financial resilience.”
