Brits struggle to make ends meet
Three in ten (30 per cent) Brits say their finances are now so stretched that an increase of less than £100 in their monthly living costs would mean that they could no longer make ends meet. New research from moneysupermarket.com, looked at strains on household expenditure and found that there was an ‘affordability tipping point' for Brits faced with the ever increasing cost of living.
The ‘affordability tipping point', where the cost of day to day living becomes so high that consumers can no longer stretch their finances to make ends meet, has already been reached by some Brits. Almost a quarter (22 per cent) say they wouldn't be able to cope if their monthly expenditure was stretched any further, as the cost of living has now become too high for them.
Cost of living
The research further revealed that four in ten adults (40 per cent) say the soaring cost of petrol, which has already seen a litre rise to above £1.33 for the first time ever, has had the biggest impact on their spending and budgeting over the last 12 months. A quarter (23 per cent) of adults say it is the rising cost of food and two in ten (19 per cent) say it is the rising cost of paying for utility bills such as heating which is causing the biggest strain. In the last six months alone, UK adults say their weekly outgoings have risen by an average of £54, and they are surviving on just £247 a month after all bills and outgoings are paid for. However, with disposable income forecast to fall by a further £780 per cent this year, consumers finances look set to be stretched even further before there is any let up.
Not only are consumers battling the rising cost of living and a reduced level of disposable income, they are also contending with lack of pay rises at the same time, which means in real terms, incomes are being reduced. More than six in ten adults (61 per cent) say they have not had any form of salary increase in the last year. The knock-on effect has been a greater need to budget to make sure all bills can be paid, with 77 per cent of adults now saying they have to budget every month to make ends meet. This rises to 83 per cent of adults who are parents or who have children under the age of 18 who are financially dependent on them.
The stretch in finances and limited access to disposable income has clearly had a detrimental effect on how UK adults are feeling about their future. Nearly four in ten (38 per cent) say they are worried because they are unable to save any money and they have reached the point where they can budget no further. Over a quarter (28 per cent) say they are stressed while one in ten adults (10 per cent) loses sleep over the state of their finances. This jumps to 17 percent for parents or adults with children under the age of 18 who are financially dependent on them.
Base rate increases
Whilst there is mounting speculation of a summer base rate hike from its current historic low of 0.5%, a third (33%) of adults say they would welcome this as they would benefit from an increase in returns from savings. However, at the same time, almost a quarter (22 per cent) of adults are worried that any base rate hike will automatically be passed on by mortgage providers, and monthly payments will begin to rise. If the base rate rises by 0.5% to 1% at some point this summer, moneysupermarket.com calculates the average mortgage monthly repayment would rise by £40 meaning UK homeowners would creep closer to their affordability tipping point, pushing their finances closer to the edge.
Clare Francis, personal finance expert at moneysupermarket.com said: "The increase in the cost of living is something UK adults have had to bear the brunt of over the last 12 months. The rising price of petrol and everyday basics such as food and energy have hit consumers hard, and at times it can feel like it is impossible to make any more savings when essentials are rising so steeply. However, there are still small steps that people can take that will help save those vital pennies.
"Sitting down and looking at all of your outgoings, and shopping around or using a comparison website to make sure you are on the best product for your individual needs, is a great way of giving yourself a pay rise. Many consumers are paying far more than they need to for their household bills and there are significant savings to be had by switching to a better energy tariff and making sure that you find the best deal when your car or home insurance is up for renewal - the savings can literally add up to hundreds of pounds over the course of the year.
"2011 is set to be another tough year for many households, with finances continuing to be pushed to the max. People should be reviewing all of their outgoings as a priority to see where they can get better value and free up vital cash."