The UK’s debt landscape in 2023

The Debt Needs Survey provides us with insights into the need for debt advice across a nationally representative cross section of the UK population, including ethnic minority, socially deprived and rural communities.

When carrying out the survey, we strike a balance between maintaining comparability between each year’s survey and reacting to what has been a very changeable world. For example, the rising cost of living and higher mortgage rates were topics we needed to address.  

The measure we use identifies the people who need debt advice and those who are at risk of needing it if their situation does not improve. Respondents are broken down into:

• People showing no signs of needing advice or guidance
• People in the ‘at risk’ category, who would benefit from money guidance via the MoneyHelperOpens in a new window or other sources, or those at a tipping point who need to seek advice before their situation worsens
• People who definitely need regulated debt advice

See an explainer about the need for debt advice measureOpens in a new window

The survey is conducted online, and like all organisations conducting online research, we continually review and strengthen our data quality control procedures from year to year. These steps identify the small minority of interviews that don't seem to represent considered and realistic responses to the questions we ask.

In 2023, 15% of the UK adult population fell into this category, equivalent to 8.1 million people. Most people in the UK, 61% of the population – or 32.5 million people – don’t need debt advice. 

Our assessment is that there has not been a substantive change to the amount of people who need debt advice when compared to 2022.

See a graph illustrating how many people need debt adviceOpens in a new window

The profile of the people who do need debt advice also hasn’t changed a great deal. They are typically:

• Under 35 years old.
  
• In households with children and low incomes (73% have an annual household income of less than £30,000 before tax).
• Most (61%) rent their home from social or private landlords and a further 28% own their house on a mortgage. There’s more on mortgages further on in this article.
• People needing debt advice are from ethnic minority communities (31%), which make up less than 20% of the adult population as a whole. 
• They also were more likely to have experienced an income shock in the previous three years, like redundancy or a drop in earnings.

These figures leave 24%, or 12.6 million people, in our ‘at-risk’ category. These people are struggling to keep up with bills and credit commitments, or they are running short of money for essentials and using high-cost credit instead. Creditors have not started action against them yet.

This year, we have gone into more depth when looking at the 'at risk' group. As interest rates and the cost of living continue to be a challenge to households, we looked at their situation and compared them to both people who need debt advice and to the UK population.

People at risk of needing debt advice are more similar to the UK population as a whole in terms of income, tenure, and ethnicity. However, they are generally younger:

See a graph illustrating this profile of people needing debt adviceOpens in a new window

UK population percentages in the tables, graphics and text of this blog are based on the results from everyone interviewed in the Debt Need Survey. Detailed demographic quotas and weighting were used that accurately represent the UK population 

While the at-risk group are more varied demographically compared to people who need debt advice, there are similarities between the two groups. The at-risk group’s circumstances have impacted on their finances, but not as severely as those who need debt advice.

Let’s start with employment: both the at-risk and need debt advice groups are mainly in paid employment, as most of them are still of working age. However, they are more likely to be working on fixed term or zero hours contracts, or doing gig economy or casual work than the UK population as a whole:

However, the at-risk group are also not as secure as the UK population as a whole, so it’s important that they are financially resilient. Unfortunately, that isn’t always the case. 

In the survey, we asked people how they would cope in certain situations that might occur and how often they don’t have money when they need it:

1. What is the largest, unexpected bill they could pay within the next seven days?
2.  If you lost your main household income, how long could you cover household expenses without borrowing money or asking friends or family for help?
3. How often do you find yourself in the situation where the timing of bills and regular expenses doesn’t match up with your income, so you don’t have money available when you need it?

The results for the three groups are as follows:

The at-risk group are just about managing, but life events could easily tip them over into financial difficulty.  This has already happened to some people:

Using the guidance that MaPS provides on our MoneyHelper website to prioritise bills, maximise income and build savings could definitely help people in the at-risk group, but some are starting from a position of low financial resilience.

We wanted to understand how recent mortgage rate rises had impacted people, coming after several years of low and stable interest rates and the availability of fixed rate deals. We also wanted to know how this might change in the future as their fixed rate deals come to an end.

We learned that 35% of the at-risk group have a mortgage, which means they will have some exposure to changes in interest rates now or in the future. Most (20%) are on a fixed rate mortgage with an interest rate of 1–4% and only a few (2%) had a fixed rate term ending in 2023. 

There are a few causes for concern, however, with 7% on variable rate mortgages exposed to changes in rates, and 4% who are tied into fixed rates of 5% or more.  Finally, 23% are renting from a private landlord and may also be impacted if their landlord owns the rental property with a mortgage and needs to charge a higher rent to cover their own payment increases. 

See a graph illustrating mortgage types of people at risk of needing debt adviceOpens in a new window

We know that people with mortgages and higher incomes have started to ask for debt advice, which hasn’t happened in the past. However, based on these findings it seems unlikely that this will increase significantly for now.

One step that borrowers could take when starting to get into difficulty is asking for help from their mortgage provider. At the time of publication of this blog, the biggest lenders are currently offering a short-term switch to interest free payments, extended loan terms and other measures.  

Mortgage holders have varying levels of confidence about the future and their ability to keep up with payments, either on a new fixed rate deal that they started in 2023 or if their rate changes in the next 12 months.

We asked people to rate their confidence on a scale, with 10 meaning they were very confident and 0 not at all confident.

Only half (50%) gave themselves a score of between eight and ten, and this was lower for the at-risk group (36%) and those who need advice (28%).

See a graph illustrating confidence in ability to keep up with mortgage repaymentsOpens in a new window

Learnings from the 2023 survey will allow us to: 

• inform funding decisions for debt advice nations with devolved governments 
• profile people at risk of getting into problem debt and those who need debt advice now, as well as how this is changing. 

We will continue to monitor the need for debt advice in the UK, using the insights we gain to inform our policy decisions and support the agencies we fund to deliver debt advice.

Our consultation on debt advice commissioning, launched prior to publishing this blog, uses the data from the 2022 Debt Need Survey as evidence. As mentioned above, the profile of people needing debt advice has not changed a great deal between 2022 and 2023.