26/03/2020
The Financial Conduct Authority, which regulates financial services, has recently published an insight into the ‘journey into financial distress’ and what people who experience financial distress have in common.
They looked at a sample of credit files from the UK credit reference agencies which showed that approximately 12% of people had fallen into financial distress during a 3-year period (Jan 15 – Feb 18).
They defined a person as being in financial distress when:
They discovered that people who go on to experience financial distress tend to share some common characteristics around six months before hitting problems. The characteristics include:
This isn’t to say that every young person on a lower income will end up in the same situation; we know that is not the case but, from their research, it was a common finding.
Their research also contained some interesting statistics on the different types of borrowing which are likely to affect financial distress.
Borrowing Group | Percentage that fell into financial distress | Average length of distress period |
---|---|---|
Mortgage holders | 6% | 5.9 months |
Standard cost borrowers (standard interest rates) | 8% | 6.5 months |
High cost borrowers (high interest rates) | 18% | 7.8 months |
Household bills only | 5% | 8.3 months |
Mortgage holders Percentage that fell into financial distress 6%
Average length of distress period 5.9 months
|
Standard cost borrowers (standard interest rates) Percentage that fell into financial distress 8%
Average length of distress period 6.5 months
|
High cost borrowers (high interest rates) Percentage that fell into financial distress 18%
Average length of distress period 7.8 months
|
Household bills only Percentage that fell into financial distress 5%
Average length of distress period 8.3 months
|
If you feel that you are in, or are heading towards financial distress, don’t worry. You’re not on your own; help and guidance is available. You can find a wealth of information on our help and guidance pages, and you can get tailored, online, debt advice here
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