Londoners have become more reliant on their savings than anywhere else in the UK, with almost three million people forced to dip into savings pots to afford essential everyday costs, according to new research from AI-powered transaction analytics firm, Fuse.
As the cost of living crisis persists, many UK residents have been forced to either dip into, or completely wipe out, their savings. This problem appears to be the worst in England’s capital. In fact, around 33 per cent of people in London rely on their savings to pay everyday expenses compared to 24 per cent of people across the UK as a whole.
As a result, exactly half of Londoners admit they are more concerned about their financial position than at any point in the last three years – compared to a 40 per cent UK average.
Fuse also revealed that these concerns are forcing 19 per cent of people in London to rely on credit to pay everyday costs with a further 18 per cent turning to borrowing to cover their mortgage or rent payments (compared to just 12 per cent across the UK).
Despite increasing reliance on credit, 20 per cent of people in London say their access to credit has worsened since the pandemic – higher than the UK average of 16 per cent. Many people struggling to access mainstream credit options are forced to turn to high-cost alternatives to afford everyday costs. Nineteen per cent of Londoners who borrowed from high-cost lenders had to do so as they failed the affordability tests of mainstream providers, compared to a UK average of 11 per cent.
Thirty-one per cent of Londoners say they want improved guidance and support from financial services providers, compared to 21 per cent of people across the UK. One in three (31 per cent) people in London also believe their bank could do much more to support them.
A London credit crisis?
Previous research from Fuse showed that 32 per cent of lenders have seen an increase in borrower defaults over the last 12 months and 31 per cent of borrowers have been rejected by lenders due to failing affordability checks.
Sho Sugihara, CEO and co-founder of Fuse, discussed the significance of the findings: “Londoners are facing a potential credit crisis – with the cost of living crisis showing no sign of easing, the savings pots that millions of people have been using as a crutch to cover everyday costs will soon have vanished.
“Without savings to fall back on, these people will be forced with little option but to turn towards credit to not only pay for essential costs but also to keep a roof over their heads. As we enter the expensive winter period, financial pressures will only rise. Unfortunately, increased reliance on credit is building at a time when many Londoners are experiencing a drop in their access to credit products.
“Lenders must ensure they not only improve access to affordable credit products but also enhance the support solutions on offer to prevent borrowers from piling up long-term debt. By utilising data insights into borrower affordability and vulnerability more effectively, lenders can identify potential issues for borrowers, stepping in with support at an earlier stage and reduce borrower defaults.”