- People in London are much more likely to rely on their savings to pay everyday living expenses with a fifth of people also forced to turn to credit to cover these costs
- Half of Londoners admit they’re more concerned about their financial position than at any point over the last three years
- However, a fifth of people in London say that access to credit has worsened since the pandemic as concerns grow over how households will stay financially afloat as living costs continue to rise
Londoners are the most reliant on their savings with almost 3m people forced to dip into
savings pots to afford essential everyday costs*, according to new research from AI powered transaction analytics firm, Fuse.
A third (33%) of people in London rely on their savings to pay everyday expenses compared to 24% of people across the UK. However, the ongoing cost of living crisis means that the savings pots of many households will have eroded or been emptied completely
As a result, half (50%) of Londoners admit they are more concerned about their financial position than at any point in the last three years compared to the 40% UK average.
These concerns are also forcing a fifth (19%) of people in London to rely on credit to pay everyday costs with a further 18% turning to borrowing in order to cover their mortgage or rent payments – compared to one in ten (12%) across the UK.
Despite increasing reliance on credit, a fifth (20%) of people in London say their access to credit has worsened since the pandemic – higher than the UK average of 16%. There is also an issue with the credit products that people are able to access with less than a third (29%) of Londoners believing that they offer good value.
Many people struggling to access mainstream credit options are forced to turn to high-cost alternatives to afford everyday costs – a fifth (19%) of Londoners who borrowed from high-cost lenders had to do so as they failed the affordability tests of mainstream providers, compared to a UK average of 11%.
A third (31%) of Londoners say they want improved guidance and support from financial services providers, compared to a fifth (21%) of people across the UK. One in three (31%) people in London also believe their bank could do much more to support them.
Previous research from Fuse showed that a third (32%) of lenders have seen an increase in borrower defaults over the last 12 months and a third (31%) of borrowers have been rejected by lenders due to failing affordability checks**.
Sho Sugihara, CEO and Co-Founder of Fuse, comments: “Londoners are facing a potential credit crisis – with the cost of living crisis showing no sign of easing, the savings pots that millions of people have been using as a crutch to cover everyday costs will soon have vanished.
“Without savings to fall back on, these people will be forced with little option but to turn towards credit in order to not only pay for essential costs but also to keep a roof over their heads. As we enter the expensive winter period, financial pressures will only rise. Unfortunately, increased reliance on credit is building at a time when many Londoners are experiencing a drop in their access to credit products.
“Lenders must ensure they not only improve access to affordable credit products but also enhance the support solutions on offer to prevent borrowers from piling up long-term debt. By more effectively utilising data insights into borrower affordability and vulnerability, lenders can identify potential issues for borrowers, stepping in with support at an earlier
stage and reduce borrower defaults.”
Products, such as Fuse’s Health Signals, have been designed to support lenders by providing them with greater insights into areas of consumer vulnerability as well as predict arrears risk and monitor the impact of financial products on their customers. Alongside their advanced affordability and credit risk assessments, Fuse’s aim is to aid financial
inclusion in a way which is sustainable for lenders.
Fuse is 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, receiving nearly half a million downloads to date, Pave utilises Open Banking transactions to help consumers build better access to credit.
Featured Photo by Massimo Virgilio on Unsplash.