Q1 2024 Wealth & Finance 9. Over 11m financially vulnerable people reliant on loans to survive whilst access to credit plummets 11.5 million, or four in ten (39%), financially vulnerable people*, have no option but to turn to credit to afford everyday expenses – over double the UK average (15%) finds research from AI powered transaction analytics firm, Fuse. Three in ten (28%) also say that they are reliant on credit to pay for their mortgage or rent – again, over double the UK average (12%). With rent prices predicted to rise yet again by another 6%, and 1.6 million people’s fixed rate mortgage deals expiring in the next 12 months, many will see their monthly repayments rise. UK Finance has also predicted that UK lending for house purchases will drop by 8% and that more people will accrue arrears in 2024. Despite rising numbers of people forced to turn to credit to meet rent or mortgage costs, Fuse’s research shows that access to credit options is declining at a time when people, especially financially vulnerable people, are most in need. 40% of financially vulnerable people say that their access to credit has worsened since the pandemic, and even more worryingly, over a third (35%) say that they are now struggling to access the vital credit products that they need in order to survive – compared to an average of 14% across the UK. Reduced access to credit has forced many to fall back on their savings pots to get through the expensive winter months – four in ten (36%) financially vulnerable are reliant on savings to pay for everyday expenses. Though the FCA’s Consumer Duty rules were introduced in mid-2023 to ensure improved financial outcomes for consumers, one in five (19%) believe that their bank is responsible for getting them into debt. This has prompted calls for lenders to offer more effective support to borrowers. Enhancing affordability measures by utilising enhanced insights and data can help lenders predict changes in affordability, probability of default, and even financial vulnerability levels before they occur – this is a key step in protecting borrowers and offering more personalised and affordable products. Sho Sugihara, CEO and Co-Founder of Fuse, comments: “We are living in an increasingly volatile economic climate and the financially vulnerable are in danger of being left behind as the UK’s financial gap continues to widen. Many people are solely reliant on credit to pay for everyday expenses and in some cases, keep a roof over their heads. However, it is hugely concerning that access to affordable credit options is plummeting at the exact moment when reliance on credit is spiking. “The entire financial sector, not just banks, could be doing more to protect borrowers - but there needs to be better support solutions. Embracing • Four in ten (39%) financially vulnerable people are forced to turn to credit to pay everyday expenses – over double the UK average (15%). • However, over a third (35%) of financially vulnerable people struggle to access the credit they need to pay for essential costs and 40% say that their access to credit has worsened since the pandemic. • One in five of these people (19%) say that banks are currently to blame and are responsible for getting them into debt. technology and AI-led insights assists lenders during affordability testing to ensure not only more accurate credit decisions but also more personalised, effective support solutions - a vital step in creating a more inclusive financial system with improved outcomes, especially for financially vulnerable borrowers.” Products, such as Fuse’s Health Signals, have been designed to support lenders meet the Consumer Duty requirements and provide risk and compliance teams with greater insights into areas of vulnerability as well as predict arrears risk and monitor the impact of financial products on their customers. Fuse is the latest product from credit builder app, Pave. Since launch, Pave has analysed more than 150,000 lending decisions, 1.5 million consumer credit reports, and over 400 million Open Banking transactions. Pave seeks to bring more financial equality to millions across the UK. As a fully regulated credit builder, receiving nearly half a million downloads to date, Pave utilises Open Banking transactions to help consumers build better access to credit.
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