UK households face severe credit and living cost pressures

New research from the Centre for Responsible Credit reveals that approximately 3.5 million low- to middle-income households in Britain are unable to afford both essential living costs and credit repayments. For these households, the median monthly budget shortfall is roughly £633. The report notes that 2.6 million of these households experience persistent shortfalls lasting at least six months.

During the period between September 2023 and March 2026, at least £1.97 billion was lent to households already in persistent shortfall, suggesting potential breaches of Financial Conduct Authority (FCA) affordability rules. Approximately 1.5 million households in persistent shortfall are reportedly cutting back on necessities such as food and heating to maintain repayments.

Concurrently, UK banks are preparing for a potential surge in unpaid debts as household savings reach three-year lows. Analysts suggest top lenders may need to provision significantly more than the currently estimated £4 billion for loan losses in 2027. Barclays is identified as having significant exposure to these unsecured credit risks, including credit cards, personal loans, and overdrafts.