WALES, U.K.–Families in Wales are going into debt to pay for basics like food and fuel as the cost of living continues to rise, according to Cambrian Credit Union here.
CCU told ITV.com it has seen a surge in applications to borrow money, although not for treats such as holidays or luxuries, but instead for everyday essentials.
“Prices are rising at their fastest rate for 30 years and it's pushing more low and middle income households into hardship,” ITV.com reported. As a result, more people are looking to consolidate their debt in order to have some disposable income, the report added.
General Manager Ann Francis said members have seen their disposable income hit hard. "People are coming in for top-up loans,” she told the news outlet. “Many were already finding things difficult after the £20 uplift in Universal Credit was scrapped. They are borrowing to cover basics."
Reductions in Discretionary Spending
ITV.com noted that those who earn the least spend a higher percentage of their income on the essentials such as food, heating and fuel.
“With electricity bills nearly doubling as the price cap increased earlier this month, and food prices expected to rise by 15% in a year, budgets are becoming evermore stretched,” the report added.
According to ITV.com, an estimated £12 billion could be wiped off discretionary spend in the U.K. over the next year as everything from rents to mobile phone bills and National Insurance (NI) contributions go up.
“NI payments rose to 13.5% this month, meaning a typical family in Wales will pay an extra £112 in contributions this year,” ITV.com reported. “More people are having to decide where to save, and those on lower incomes have less financial headroom. The Cambrian Credit Union said it is really important that people ask for help and claim the assistance available.”
ITV.com further reported that many people have been pushed into choosing whether to heat their homes or eat as a result of the cost of living crisis.
Government Publicizes CUs
The Welsh Government is providing extra funds to publicize the work of the credit unions across Wales as part of its £380 million pound Cost Of Living support package.
“This is designed to inform people on where to access support - and help stay out of the arms of high cost Buy Now, Pay Later money lenders and more debt,” ITV.com stated.
Jane Hutt, minister for Social Justice, told ITV.com there is a risk people could turn to illegal lenders.
"There is a significant risk that people in desperation and those with a poor credit history who are unaware of affordable providers such as credit unions, will turn to high cost or illegal lenders,” Hutt said. "To mitigate this risk, we have secured an additional £620,000 in 2022-23 for credit unions to continue an intensive digital marketing campaign and expand their lending so they can support more financially vulnerable people.
"This is in addition to £500,000 already in place to support the work of credit unions.
"A No Interest Loan Scheme will begin in Wales this year, which will support even more people to access affordable credit when they need it."