I predict ...... a riot? No, but I do predict a debt and housing crisis for 2023.
I predict …. a riot? No, not a riot but I do predict a housing and debt crisis for 2023 and here's why.
The Bank of England announced another rise in interests rates this week, the fourteenth rise in a short period of time. If you’re sat snuggly in your fixed interest rate at 2% or less its easy to feel a little smug or disinterested in this news, but for the 800,000 people who are going to drop out of their fixed rates very soon, or for the hundreds of thousands who already have here’s a snap shot of what they are experiencing.
KEY POINT: Workers in the North East are already facing low levels of financial resilience and cannot afford another mortgage/rent rise. We know this because research conducted by Society Matters tells us people have changed their spending habits to try and cope with increasing costs, used their savings and borrowed/used credit to see off COVID and Cost of Living Crisis. This means they cannot afford to top up their depleted savings or weather unexpected expenditure (like a mortgage rate increase…). People are existing with very low financial resilience with 21% of survey participants telling Society Matters there’s a gap between their income and their essentials and 45% claiming they have less than £50 after paying for essentials each month. Not much has to go wrong in your life for that £50 to be swallowed up; a prescription charge of £9.65, replacing a school jumper £13.00, or to travel to a hospital appointment £6.00, heaven forbid you would need to pay a vet fee with a single appointment costing in excess of £100. These are not extravagances, they are the necessities of life.
KEY POINT: Data from Citizens Advice Gateshead tells us mortgage holders are increasingly the worst affected by negative budgets and debt, especially those who are single. Of course we understand any interest rate rise is designed to reduce household disposable income by increasing spending on primarily mortgages, but also other credit items but these persistent rate increases are really taking households to limits of their resilience. Mortgage holders are now national Citizens Advice’s highest proportion of people with debt issues in a negative budget (56%) and have experienced the largest increase in negative budgets since 2019 (33% to 56% of all debt clients). This group has an average negative budget of -£147/month with monthly expenditure on essentials rise from £438 to £543 – before mortgage payments are factored in, so it’s a pretty gloomy picture.
But if you are a single parent its gloomier still, with Single Parent Mortgage Holders (-£182) and Single Adult Mortgage Holders (-£200), Asian British Mortgage Holders (-£280), those between 45-65 (-£187), Unemployed (-488). All of this means people are going to extreme lengths to survive with a 36% increase in owner occupiers seeking a food bank referral since Apr 22. These are very stark increases in demand for services which are not an official part of the government funded welfare system.
And of course a rise in interest rates doesn’t just affect mortgage holders, it has an impact on renters too. KEY POINT: For those on benefits, as rents increase the system is not keeping up, squeezing their already negligible disposable income. Most private sector landlords are also mortgage holders, so any increase in mortgage repayments may be passed onto renters often with little time for the renter to adjust.
Further, as the cost of borrowing increases, it is more expensive to build new houses, so there’s little relief coming forward in the shape of affordable housing, or other social models of accommodation. So, all of this combines to create a pretty gloomy year ahead with more and more middle income families seeking our help. This is one of the very many reasons why at Citizens Advice Gateshead we’ve extended our opening hours to include Saturday and Sunday 10 am til 2pm, and why we are offering late night and early morning appointments wherever we can.
If you or someone you know is worried about mortgage or rental costs don't wait for the eviction notice to land, seek help as soon as possible. Click here to find the opening hours for your local Citizens Advice.