Brits feel the pinch as recession takes hold

The UK is now officially battling a recession, causing job losses and forcing Brits to cutback on spending. New research from Fairinvestment.co.uk has found that 62 per cent of Brits have noticed their finances being stretched since the beginning of the credit crunch.

And, as budgets are stretched, 31 per cent of Brits are considering cutting back on essential monthly repayments and bills including credit cards, loans and mortgages, suggesting that their finances are being so badly stretched that they have already made significant cutbacks elsewhere.

When asked what one monthly payment they would cut back on if they had to choose one, twenty per cent of respondents said they would have to re-assess their credit card repayments, seven per cent said they would have to cut back on their monthly loan repayments while four per cent of respondents would be forced to look at their mortgage payments, which could explain why repossessions are becoming more and more common.

When it comes to non-essential payments, it seems savings would be the first area to suffer for 42 per cent of survey respondents who said that if they had to cutback on one monthly payment it would be on their savings accounts.

A further eight per cent said that they would sacrifice their pension if they had to cutback on any one payment, which could put people in a vulnerable position in the future.

Other non-essentials that people would choose to cut back on include insurance, medical insurance would be cut out by seven per cent of respondents, while five per cent would neglect life insurance cover and four per cent said they would go without home cover.

Commenting on the results, chartered financial planner at Fairinvestment.co.uk Sharon Bratley said: "The results show how difficult it is for people at the moment to juggle their finances. It is important that people prioritise their outgoings and try to reduce their debt as far as possible, so cutting back on non-essentials like saving contributions makes sense, especially as savings rates continue to fall.

"It is vital that if people have to cut back, they do so in a way that doesn't actually cost them anything more, for example, you should keep paying your mortgage and credit card bills to ensure that you don't have any further charges applied. Indeed, although interest rates are at an historically low level, many credit card companies are actually increasing their interest rates, citing the rising cost of borrowing.

"However, the fact that almost a third of Brits would have to cutback on essential payments like loans, credit cards and mortgages as their first port of call suggests that they have already cutback on non-essentials like gym memberships and savings account deposits.

"There is help out there for people who have reached the point where they are having to cutback on essential monthly payments. If this is the case, then it is vital to seek debt advice from a qualified debt adviser who can talk to you about the whole range of options available, including budgeting, debt consolidation and IVAs."