Millions forced to borrow to keep homes warm this Christmas

Two and a half million British adults will take out loans to heat their homes this Christmas, a social landlord's poll has revealed.

Circle Housing's survey found that around seven million (15%) British adults will take out a loan over the festive period to cover costs.

More than a third of borrowers (35%) plan to take out loans just to pay their winter energy bills, while around four million people need help just to put festive food on the table.

More worryingly, one in twenty (5%) borrowers will use a payday loan and nearly 150,000 (2%) will turn to an unofficial lender or loan shark.

Matt Gaskin, Circle Housing's group financial inclusion officer, said: “Christmas is always a time of year that household budgets can get stretched and people start to feel the pinch.

“However, with the recent rises in energy bills we are more worried than ever before that people will turn to payday lenders or loan sharks, particularly some of the most vulnerable sections of society. We urge anybody who is worried about managing their money to get help right away and deal with the debt quickly.”

The survey also found that:

• Almost a third (31%) of British adults said that they plan on spending less this Christmas compared to last year.
• One in six (16%) British adults say that they associate Christmas with ‘dread’ and ‘worry’ (18%) or ‘anxiety’ (16%).
• More than three quarters (78%) of British adults expect to spend up to an extra £1,000 over the festive period.

Faisel Rahman, managing director of Fair Finance, a social enterprise tackling financial exclusion, said: “These figures reinforce what we are seeing on the ground as more people are using high cost credit, not for luxuries but for household essentials. While vulnerable tenants are most at risk, this report highlights how the rising costs impact all of us. Housing associations like Circle Housing can play a key role in helping people access advice as well as identify responsible alternatives.”

Circle Housing commissioned ComRes to carry out the survey of more than 2,000 adults, as part of its ongoing work to understand the issues facing its residents. Last year the provider helped tenants save around £450,000 on their energy bills.

A separate study found that many families will struggle to heat their homes and cope with debt this Christmas, as a consquence of the government's welfare reforms.

Research by Real Life Reform found that more households are now spending less than £20 a week on food, while over half have no money left after paying essential weekly bills.

And residents are growing ever-more concerned that the shake-up in housing, council tax and other benefits will affect their health, children’s education, communities and support networks.

In some areas, neighbours are cooking extra food and buying groceries for families and friends in their street who are struggling to cope. One group of mums even split the cost of Sunday lunch and cook in each other’s houses to make sure their children get to eat “some decent food”. However, there is also increasing evidence of isolation and desperation.

The findings are revealed in the second set of results from Real Life Reform – a major study by social landlords of more than 80 households across the North of England.

Ten housing providers have united to investigate how changes to the benefits system and Welfare to Work initiatives are affecting their tenants’ health, housing, wellbeing, finances, education and employment prospects.

Interviews conducted in 87 homes during October revealed: 

• The proportion of Real Life Reform households spending less than £20 per week on food has increased from a quarter to a third. 
• The number of people having no money left each week once bills have been paid is 51%, up from 39% in July. 
• The average spend on food per person per day is £2.10, down from £3.27.
• Households are spending 16% more on gas and electricity. 
• The proportion of households having to make debt repayments of more than £40 per week has doubled. 
• The average level of debt per household is £2,273. 
• 33% of respondents now have council tax debt.
• 83% of households think welfare reform changes will adversely impact on their health and wellbeing. 
• 86% think welfare reform will adversely affect shops and businesses in their neighbourhood – up from 68%.
• There is increasing criticism of support received to help people access employment.

Lisa Pickard, chief executive of Leeds and Yorkshire Housing Association (LYHA) and a member of the Real Life Reform steering group, said: “These findings clearly show that welfare reform is having a major impact not just on households but on their families, support networks, neighbours and neighbourhoods. 

“Families are sharing the burden and being incredibly resilient at the moment, but many people just have no safety net and are already struggling to survive. 

“With the pressure of worsening weather, rising energy costs and Christmas, there is no question that people will face difficult choices – between eating or heating their homes and getting into more debt. 

“We are seeing examples where people are already not eating properly and not heating their homes as they need to be. And this is for both in-work and unemployed households. This is not right. There will be short- and long-term consequences of these choices and some people are already at breaking point.

“As Real Life Reform continues into 2014, we will be sharing the findings with partners in other sectors, such as health and education; continue to raise awareness among MPs and policy-makers; and use the emerging trends to do all we can to support our customers.”

The Real Life Reform case studies are being interviewed by trained frontline staff once every three months for at least 18 months so that their experiences can be tracked.

A detailed questionnaire has been developed, along with ethical guidelines, with support from The University of York’s Centre for Housing Policy. The study is also being supported by the Northern Housing Consortium (NHC). 

NHC executive director Charlotte Harrison said: “It is vital that Real Life Reform continues to explore the impact of welfare changes on households across the North.

“We strongly believe that welfare changes should not be seen in isolation but the wider context needs to be understood, including demographic profiles, labour market conditions and housing market dynamics.

“It is vital, therefore, that Real Life Reform continues to provide a Northern insight into welfare reforms and seeks to ensure that national and local politicians and policy-makers understand how reforms impact differently across the country.”