Financial watchdog warns of household finances

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Many households will experience financial difficulties this winter as the cost of living skyrockets and the end of government support bites, the financial watchdog has warned.

With the rise in food, gas and gasoline bills – along with the reduction in universal credit and the end of holidays – more and more people will find themselves in a vulnerable position and tempted by easy but expensive credit.

Unveiling its new approach to regulating consumer debt, the Financial Conduct Authority said it will work with lenders to ensure the growing number of people facing financial hardship is a lifeline.

Financial worries: Rising cost of living will lead to more financial hardship, FCA warned

“We expect many people to stay or experience financial hardship over the next few months, feeling the impact of rising prices and the end of temporary supports such as leave and increased labor. universal credit, ”said Nisha Arora, director of FCA. consumer and retail policy.

“We make sure lenders provide borrowers with the support they need when they run into trouble.”

Households face ‘at least’ £ 442 of increase in energy and gasoline prices on average this winter, according to a separate Scottish Friendly study.

But if gasoline prices exceed 160 pence a liter, households could shell out an additional £ 700 per person or more than £ 1,200 for a couple who both depend on the car for commuting, the UK mutual fund said.

Gasoline has already increased by 1.5 pa-liter in September to an eight-year high of 136.8 pence, but prices are expected to skyrocket to an all-time high as Christmas approaches.

With gasoline and energy making up about 40% of the basket of goods used by the Office for National Statistics to calculate inflation, the total increase in the cost of living could be “much higher than that”, according to Kevin Brown , savings specialist at Friendly Scottish.

Gasoline prices expected to skyrocket to all-time high as Christmas approaches

Gasoline prices expected to skyrocket to all-time high as Christmas approaches

“While Boris Johnson this week congratulated himself on his perceived creation of a ‘high-wage, high-productivity economy’, his words failed to mask the true nature of the UK economy today,” did he declare.

He added: “The wage increases are great, but if the cost of living goes up at the same time, then any of those gains will be wiped out.”

Ofgem today warned that there will be a “Significant increase” in the ceiling on energy bills – hitting millions of Britain’s poorest people – with soaring energy prices expected to push the average annual bill above £ 2,000 for the first time.

As the gas crisis intensified, industry analysts suggested the current energy cap of £ 1,277 would rise to £ 800.

The rise in the cost of living comes before workers also have to swallow tax increases next year from the national insurance hike, which will subtract £ 254 from a median employee’s take-home pay, according to Scottish Friendly.

The Institute for Fiscal Studies also warned that the housing tax could increase by up to 5% every year for the next three years to fund long-awaited social protection reforms.

As the gas crisis escalated, industry analysts suggested the current £ 1,277 energy cap could rise to £ 800

As the gas crisis escalated, industry analysts suggested the current £ 1,277 energy cap could rise to £ 800

Meanwhile, other reports suggest people are already spending more and saving less than in the last quarter, as price hikes lead to more spending.

A survey of 4,000 adults by pensions and retirement specialist LV = found that nearly 40% of those polled saw their spending increase in the past month, with 19% saying they were saving less.

About one in five Britons said they expected their finances to deteriorate in the next three months, and more than a quarter said they were concerned about rising inflation.

More than a quarter also said their finances had deteriorated in the past three months.

Clive Bolton, Managing Director of Savings and Retirement at LV =, said: “With the removal of foreclosure restrictions, the LV = Wealth and Wellbeing Monitor shows that although consumer sentiment has deteriorated over the years. three months ago, it remains much improved from the low point at the end of last year.

“We are in a period of adjustment as life slowly begins to return to normal after Covid and the reality of living in this new environment is starting to bite.”

The rising cost of living comes after the pandemic has already hit some household finances hard.

Between February and October last year, 20 million adults in the UK saw their financial situation deteriorate and nearly 10 million saw their unsecured debt rise, the FCA said.

Citizens’ advice offices in England and Wales received almost 40% more calls about debt in August this year than in August 2020.

The FCA has said it will crack down on bad practices from some lenders that vulnerable people tend to turn to when facing debt problems.

In July, he warned that so-called debt conditioning companies cash in by manipulating clients’ income and expenses to qualify them for repayment plans that pay a commission of more than £ 1,000.

The regulator also said it was working on new regulations for buy-it-now and pay-out products.

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