In January 2024, the total Direct Debit failure rate rose to 1.07%, data from the Office for National Statistics (ONS) has revealed.
This marked a 14% increase from January 2023, and was the highest level seen since the data series started in January 2019.
Newspage asked money experts for their thoughts.
Reaction:
Amit Patel, adviser at Trinity Finance:
“Direct Debit failures increasing to the highest level seen since the data series started in January 2019 is the latest example of the immense financial stress households are under.
“Spiralling mortgage rates, double-digit inflation, high energy costs and increases in council taxes over the past few years have all taken their toll.
“It’s no surprise a technical recession was announced today.
“The average household is under phenomenal pressure.”
Riz Malik, founder and director at R3 Mortgages:
“It’s no surprise Direct Debit failures have risen and equally we can expect them to continue to rise given that the UK is technically in recession.
“Credit cards and overdrafts will get exhausted as the availability of unsecured credit dries up for many struggling with the cost-of-living crisis.
“Factor in rising mortgage costs for those refinancing and you will have a population that will start taking to the streets.”
Justin Moy, managing director at EHF Mortgages:
“Assuming that many of these cancellations will be for a mortgage, finance or other essential bills, it is yet another indication of the deterioration of the UK economy, supporting today’s GDP data and the slip into recession.
“Anyone contemplating this really needs to speak with their lenders first, make arrangements and use the tools within the Mortgage Charter to bring their costs down in the short term.
“To do nothing will be the worst decision many will make unfortunately.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“Direct Debit failures are a worry and point to a broader issue showing that people are at breaking point because of higher mortgage rates and rents, the highest tax burden in decades and the spiralling cost-of-living crisis.
“It’s simple maths; if there’s more going out than is coming in, something has to give.
“With the news this morning that the UK is officially in recession, worse still that the GDP per capita figures paint an even bleaker picture for personal incomes, this could be the thin end of an extremely nasty wedge that compounds at a rate of knots.”
Ben Perks, managing director at Orchard Financial Advisers:
“Another alarming stat from the Office for National Statistics, which provides further evidence of the stress household budgets are under.
“An increase in Direct Debit failures shows that people are struggling to prioritise spending as the cost-of-living crisis rumbles on and they move onto much higher mortgage rates.
“Government action is needed to provide much needed financial respite to the public, especially as we have dipped into a recession this morning.”
Akhil Mair, director at Our Mortgage Broker:
“The latest data from the Office for National Statistics (ONS) paints a grim picture.
“We are in an echo chamber of bad news. This surge in direct debit failures poses significant concerns for individuals, businesses and financial institutions alike.
“The alarming trend underscores the urgent need for proactive measures to address the mounting economic challenges ahead.”
Ken James, director at Contractor Mortgage Services:
“With the grim GDP report out today and Chancellor Jeremy Hunt admitting that today’s data is challenging, it’s no surprise that many are starting to struggle to pay their bills and that direct debit failures are on the rise.
“With the Government’s focus largely centred on the need to bring inflation down, will there be any real attention brought to the plight of those struggling to make ends meet?
“Those that need help now are less concerned about the medium to long term outlook but what is happening to them now.
“With the build-up of pressure and the cost-of-living crisis, couple with higher mortgage rates and increased rents, is it any wonder Direct Debits are not being paid?”
Michelle Lawson, director at Lawson Financial:
“This is something I have seen an increase in on borrowers’ bank statements.
“People are really struggling and some bills are inevitably being missed.
“Also, credit is so readily and more easily available to spread over months that we are seeing a large uptick in household items, some with very low payments, being spread monthly.”
