RISING ENERGY BILL COSTS LIKELY TO PUSH TWO IN FIVE FAMILIES WITH CHILDREN AT HOME INTO DEBT
- 42% of families with children at home say they will need to take on additional debt to afford their energy bills
- 22% of families with children at home are, or have been, in arrears to their energy provider in the last twelve months, with 10% still in the red
- A third of families (33%) with children struggled to pay their household bills over the last week
A hike in the energy price cap of £693 is set to push two in five families into debt, according to the latest Household Financial Confidence Tracker from comparethemarket.com. The price cap was announced in February and will come into effect in April. 42% of families with children at home believe they will need to take on additional debt to afford their energy bills – more than double the number (19%) of people without children.
Due to the ongoing gas and energy crisis, Ofgem’s new price cap level is set to rise by £693 annually for millions of households. For the 31% of families with children on a Standard Variable Tariff, and the 14% on a prepayment meter, the increase could cause significant financial difficulty. Two-fifths of families (44%) are on a fixed-rate tariff.
As many as one in five (22%) families with children at home report being in arrears to their energy provider, or have been, in the last twelve months, compared to only 7% without children. More than a third (35%) of families are not currently in debt but are worried they will soon fall into arrears.
As a reflection of how rising energy, living, food and fuel costs are hitting the personal finances of UK households, a third of families (33%) with children at home said they had struggled to pay their bills over the last week. In addition, one in three (32%) households with children at home do not feel confident in their ability to meet their financial obligations over the coming weeks – compared to one in five (21%) without children. These figures also reveal there has been no significant improvement in financial confidence over the last two years; at the height of the coronavirus pandemic in April 2020, 31% of families with children at home were concerned about meeting the demands of household bills.
Of those who have a mortgage, three-fifths of households (61%) with children at home are worried that the Bank of England raising interest rates will impact their ability to manage and pay for future household bills – compared to 44% without children.
Alex Hasty, director at comparethemarket.com, said:
“Rising living costs are a massive cause for concern for millions of households across the UK. The current cost of living crisis is also showing no signs of ending yet. Many households are facing a significant increase to their outgoings and could be pushed into debt.
“Given market uncertainty with energy right now, the best option for most households is to move onto an SVT rather than opt for a fixed-rate alternative when their current deal comes to an end. We recommend that most stay on, or allow themselves to be moved onto, a default tariff until more competitive deals return to the market. You can find a few tips here that could also help you take some control over the soaring gas and electricity bills.”
Despite a full easing of England coronavirus restrictions, 56% of individuals feel more pessimistic about their finances compared to this time last year when the country remained in lockdown. Only a third (33%) feel more optimistic. Rising energy costs (93%), living costs (89%), food costs (86%) and fuel costs (72%) are some of the main reasons behind this pessimism. Rising cost of insurance (34%) is also contributing to people’s sense of pessimism.
Rising living costs have a natural domino effect on spending, with many cutting down on additional outgoings like eating out (52%), buying clothes (45%) or going on holidays (44%). Many are also reducing savings for a rainy-day fund (45%).
Shopping around online to view potential savings ahead of renewal could help prevent households from paying over the odds. Drivers can also use comparethemarket.com’s premium tool to check if they could be paying too much for their insurance based on their age, location, and the value of their car.
Alex Hasty continued:
“There is understandably an increasing sense of pessimism among many households over their finances. With the rising cost of insurance being a factor in these concerns, one way that could help households save money is reviewing their motor and home insurance; by switching to a cheaper deal, people could save on average £130. The money saved on those bills could help to offset the rising cost of living or be put towards an enjoyable activity which has been harder to do in the last couple of years, such as a holiday, booking experiences with friends and family or treating the kids.”
Notes to editors
Yonder Consulting survey on behalf of comparethemarket.com of 2,105 UK adults between 18-20 February 2022
Motor and home insurance data sourced from comparethemarket.com
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comparethemarket.com is a trading name of Compare The Market Limited. Registered in England No. 10636682. Registered Office: Pegasus House, Bakewell Road, Orton Southgate, Peterborough, PE2 6YS. Compare The Market Limited is authorised and regulated by the Financial Conduct Authority for insurance distribution (Firm Reference Number: 778488). Energy and Digital products are not regulated by the FCA.