Single parents, renters and those with long-term illnesses face heightened financial vulnerability, according to the Office of National Statistics.
One in four people do not have enough savings to withstand a 25 per cent income decrease, which is the ONS’s definition of financial resilience, according to a recent analysis that reveals alarming trends in financial resilience.
According to the survey, single parents face heightened vulnerability, with 55 per cent lacking financial resilience, compared to 31 per cent of couples with children and 15 per cent of couples without.
Meanwhile, renters have greater hardships than mortgage holders at 22 per cent, outright property owners at 7 per cent, and tenants at 48 per cent. Financial difficulties are also more prevalent in those who are single at 28 per cent and those who have long-term illnesses or impairments at 34 per cent.
Hargreaves Lansdown head of personal finance Sarah Coles says: “The ever-tightening squeeze on our finances has been painful for us all, but for some, it has been agonising. It has crushed the resilience of single parents, renters, single people living alone and those with long-term illnesses or disabilities. However, this isn’t the full extent of the damage done, because there’s more pain lying in store for those with a mortgage.
The ONS measures resilience primarily through our ability to weather the storm if we lost 25 per cent of our income. However, it also looks at a number of other areas. It found that some 61 per cent of single parents are struggling with mortgage or rent (42 per cent of couples with kids), while 26 per cent have run out of food and not been able to replace it, and 70 per cent can’t afford to save in the coming year (41 per cent of couples with kids).
“Among renters, 53 per cent can’t afford a bill out of the blue and 13 per cent have run out of food and not been able to afford to replace it. Some 55 per cent have trouble paying their rent – compared to just 34 per cent of those with a mortgage. And things have got much worse as rents have risen. The percentage of renters who are struggling has risen from 42 per cent in the spring to 55 per cent now.
“The findings reflect those of the HL Savings & Resilience Barometer, which delves even deeper into debts and pensions too, and found that living alone, being a single parent, renting and having a long term illness or disability all lay waste to your resilience. However, the Barometer shows that this isn’t the full story. The ONS figures show that mortgage unaffordability has only risen slightly from the spring, reflecting the fact that 88 per cent of mortgages are fixed. It means we’ve only felt a fraction of the pain lying in wait for those with a mortgage.
“The most recent edition of the Barometer showed that this summer only one in three mortgage holders had faced a rise in their monthly costs. By next summer, this will rise to three in five. Those who need to remortgage while rates are higher are set for mortgage misery. When a household spends 25 per cent of its after-tax income on the mortgage, it’s considered to be at risk of falling behind on payments. In the summer, 23 per cent of people were spending this proportion or more – and by next summer that will rise to 26 per cent.
“Meanwhile, by the summer 2024, 230,000 of those who are ‘at risk’ of falling into arrears will have cash savings that cover less than three months of essential spending – making them ‘high risk’. Plus an additional 470,000 will also have unsustainable spending, so they’re at ‘critical risk’. It means that the cost-of-living crisis for those with a mortgage is likely to last even longer.”
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