11.5 million UK consumers, or four in ten (39%), financially vulnerable people, have no option but to turn to credit. The figure is over double the UK average (15%) according to research from Fuse.

Three in ten (28%) also say that they are reliant on credit to pay for their mortgage or rent. Again, the figure is over double the UK average (12%).

Rent prices predicted to rise yet again by another 6%. In addition, around 1.6 million people’s fixed rate mortgage deals expire in the next 12 months. Many UK mortgage holders will see their monthly repayments rise. UK Finance has also predicted that UK lending for house purchases will drop by 8%.

Double whammy: reliance on credit rises as access to credit declines

As a result, more people will accrue mortgage arrears in 2024.

In a double whammy, Fuse’s research shows that access to credit options is declining. This comes at a time when people, especially financially vulnerable people, are most in need.

40% of financially vulnerable people say that their access to credit has worsened since the pandemic. Moreover, over a third (35%) say that they are now struggling to access the vital credit products that they need in order to survive. This compares to an average of 14% across the UK. Reduced access to credit has forced many to fall back on their savings pots to get through the expensive winter months. Four in ten (36%) financially vulnerable are reliant on savings to pay for everyday expenses.

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By GlobalData

The FCA’s Consumer Duty rules were introduced in mid-2023 to ensure improved financial outcomes for consumers. But one in five (19%) believe that their bank is responsible for getting them into debt.

The need for enhanced affordability measures

This has prompted calls for lenders to offer more effective support to borrowers says Fuse. Enhancing affordability measures by utilising enhanced insights and data can help lenders predict changes in affordability, probability of default, and even financial vulnerability levels before they occur. Fuse argues that this is a key step in protecting borrowers and offering more personalised and affordable products.

Sho Sugihara, CEO and Co-Founder of Fuse, said: “We are living in an increasingly volatile economic climate. The financially vulnerable are in danger of being left behind as the UK’s financial gap continues to widen. Many people are solely reliant on credit to pay for everyday expenses. And in some cases, keep a roof over their heads. However, it is hugely concerning that access to affordable credit options is plummeting at the exact moment when reliance on credit is spiking.

“The entire financial sector, not just banks, could be doing more to protect borrowers. But there needs to be better support solutions. Embracing technology and AI-led insights assists lenders during affordability testing to ensure not only more accurate credit decisions but also more personalised, effective support solutions. It is a vital step in creating a more inclusive financial system with improved outcomes, especially for financially vulnerable borrowers.”

Fuse: the latest product from credit builder app, Pave

Since launch, Pave has analysed more than 150,000 lending decisions, 1.5 million consumer credit reports, and over 400 million open banking transactions. Pave seeks to bring more financial equality to millions across the UK. As a fully regulated credit builder, Pave utilises Open Banking transactions to help consumers build better access to credit.