According to data collected by Ofcom, approximately 2m households are struggling to afford internet access, broadband, and mobile phone bills, with consumer debt around these having risen by around £30m since December.
So the question is, what can be done to help?
Now that lockdown restrictions have been lifted and the country seems to be back on a trajectory to a ‘normal’ way of living, financial support – as expected – is also being phased out. Throughout the pandemic, the government has provided a number of financial support schemes including the furlough scheme and a weekly uplift in Universal Credit, to help those affected by the knock-on effects of COVID-19.
Now that this support is being lifted, will those relying on it be left struggling, or are there more plans to help those that need it?
Is the government doing anything else?
The government has recently revealed proposals to ‘trial automatic switching’ for customers paying more than necessary on their energy bills, helping them to find cheaper deals and tackle the ‘loyalty penalty’ – where energy companies put loyal customers on higher tariffs due to their loyalty and lower chance of changing providers.
The acceptance of the proposal could hugely assist those with current utility debts to both manage and pay off said debt, and act as a preventative measure to protect people from falling into future debt.
Regardless of the said proposal, research by Money Supermarket found that over 11m consumers could see their energy bills rise by 20% this year due to a number of factors such as an increased global energy usage. This goes hand in hand with recent reports by Ofwat around the removal of price caps for water companies to offset costs incurred by the pandemic.
What problems might increases in energy bills cause?
Worryingly, a number of household bills such as energy bills and rent arrears are defined as priority debts – and can have much greater consequences to the debtor if unpaid.
Currently, according to research by Homeppl, 840,000 renters are in arrears due to the pandemic, and 11% of those are unemployed. This, along with the potential rise in the cost of energy bills, could be a disaster for those already struggling, and create even more stress and struggle around finances and debt.
Jonathan McCusker, Head of Debt Advice at Freeze Debt, said:
“The last year has been a real struggle for many, and any increases in essential or priority bills such as rent or energy bills could cause an even bigger surge in those seeking debt solutions that already expected. The debt industry is set for a huge influx of those seeking advice now that government support is being phased out, so we’re preparing for a number of complex cases that have been, unfortunately, unavoidable due to the effects of the pandemic.”
How have consumer opinions and priorities changed?
Despite the apparent struggle that many are facing with the payment of household bills and rent arrears, recent Experian research highlighted that 31% of those who said they were considering buying a house in the next 5 years also said they’d be willing to ‘stretch themselves’ to purchase their dream home – even if this meant having less monthly disposable income.
This is likely to be the case for those buying houses as we speak, as a booming housing market has driven up the prices of homes, making for bigger mortgages and monthly payments. However, after 18 months of uncertainty and instability for many, house purchases are set to bring many the stability they’ve been seeking, from both a secure home, potential equity in a property, and preparation for the future.
It’s clear that the COVID-19 pandemic will continue to have adverse effects on the finances of many for years to come, and it’s going to take more than vaccinations to truly remove the lingering presence of the virus due to the millions of lives that have changed as a result. However, it seems that consumers are now, more aware than ever of their financial status and situation, and a large proportion of people will hopefully focus on moving towards a better financial future – whether through finding a debt solution or saving for emergencies.
It’s important for debt advice companies to remain focused on the consumer during this time, and provide them with the advice that will positively impact their circumstances. This is why we’re campaigning for the FCA and Insolvency Service to clamp down on the use of offshore call centres treating debt solutions as a sale, rather than a service. Read more about it here: www.freezedebt.co.uk/debt-ads-regulation
About Freeze Debt
Freeze Debt is the first debt advice and solutions app helping UK users to take their first steps towards a debt-free future. Our free service provides those struggling with unmanageable debt a confidential space to speak openly about their debt and financial worries and find a suitable solution based on their personal circumstances.
Freeze Debt's in-app messaging service is a revolutionary and modern way for users to address their debts and find solutions in less than 5 minutes, compared to the traditional and uncomfortable ‘call-centre-model’ that can take an average of 45 minutes.
So far, we’ve helped clear over £30m of debt and helped many people begin their journey to a debt-free future.