Cost of Living Crisis Stats UK 2022
We started to hear of the UK cost of living crisis back in 2021, with the media reporting that the price of essential goods was outweighing the average household income in the country.
This has occurred because of the rise in tax and inflation, the causes of which will be discussed shortly. This has primarily had an impact on the cost of food, gas, and electricity.
Though everyone in the UK is affected by this crisis, it is particularly difficult for low-income families who may struggle to make ends meet.
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What are the Causes of the 2022 Cost of Living Crisis?
There are various factors that contributed to the cost of living crisis in the UK. One significant contributor was the Coronavirus pandemic, which changed the balance between supply and demand in the UK.
Not only was production halted in many industries, but many families faced job loss, which reduced their household income.
One UK-specific cause of the cost of living crisis is Brexit. With non-native residents of the UK moving abroad after the UK’s departure from the EU, the country has suffered a shortage of labour, which has negatively affected the economy.
Finally, global factors cannot be dismissed. All around the world, and particularly in Europe, economies are being affected by Russia’s invasion of Ukraine.
It is believed that global GDP has been reduced to 1.5% and global inflation has decreased by around 1.3% (1).
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What are the Impacts of the 2022 Cost of Living Crisis?
Before we discuss the specific impacts of the 2022 cost of living crisis, we want to give a general overview of how this crisis could affect people living in the UK, and who might be the most affected.
Firstly, families with young children may struggle to find the money to pay for childcare. This will have an impact on the economy as it makes it less likely that both parents can afford to go to work, given that the cost of childcare is often higher than a part-time working wage.
Secondly, people with disabilities may struggle more than the average person as they may need to spend more money on keeping their home warm, if they are more prone to coming down with sickness.
Finally, it goes without saying that elderly people are going to struggle a huge amount as it is more important for them to live in a warm home and have access to nourishing food, which may not be possible if they have to reduce their spending to an absolute minimum.
In terms of general consequences of the cost of living crisis, unemployment is likely to increase, more people are expected to be homeless, and poverty rates will rise.
How Has the Government Responded to the 2022 Cost of Living Crisis?
There has been an outcry from British citizens who argue that the government is not doing enough to help them through the cost of living crisis. However, there have been several schemes implemented to help with the rising cost of living.
Firstly, in 2021, the government announced that it would increase minimum wage by 6.6% to £9.50, and this took place on the 1st April 2022 (2). This was intended to help low income earners to stay out of poverty, yet many people argue it isn’t enough.
Secondly, efforts were made in May 2022 to reduce the price of energy bills. It was announced that each household would get £400 off their energy bills, and as well as this, the lowest income households would receive an additional payment of £650 (3).
People with disabilities and people in their later years were also promised additional financial aid.
Finally, as of September 2022, it was announced that energy bills would be capped at £2,500 until 2024 for all households in the UK. This came after Ofgem predicted that the average household energy bills would reach an astonishing £3,549 in October 2022 (4).
Something that has been controversial is the response of the UK government compared to European governments. In Germany, the government announced a 9 euro public transport ticket, which allows users unlimited travel on trains, buses, trams and the metro for one month.
On a similar note, the Spanish government has announced free train travel from September to December 2022, which is expected to help employees who commute to work on the train, as well as anyone using the train to visit family or for leisure purposes.
Finally, in France, the government capped energy prices at 4%, whereas the UK prices saw a 54% increase. This perhaps explains why the situation is so severe for many people in the UK – the government response has not been equal to that of European governments.
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Cost of Living Crisis Stats UK 2022
We have given a general outline of the cost of living crisis, but the reality of the crisis is best understood by looking at the facts. So, what are the cost of living crisis stats UK 2022? Here are six hard-hitting statistics.
1. Homelessness has risen by 11% in England over the past three months
Statistics show that homelessness has risen by 11% over the past three months, which is largely due to the rising cost of living. There are also many families who are currently living in homes, but will soon be made homeless.
Between January and March 2022, 25,610 families with children were at imminent risk of becoming homeless. 10,560 households were either homeless or at risk of becoming homeless despite at least one member of the family working full time (5).
The injustice of homelessness was widespread in the media after the Queen’s passing, as people who chose to queue to view the coffin were offered free blankets, as well as the promise of a train to sleep on overnight if they missed the last train.
This provoked outrage as people argued that rising homelessness is not approached with the same level of concern; where are the blankets and overnight trains for people who are poverty-stricken as a result of inflation?
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2. 90% of households plan to reduce non-essential spending
We have covered the fact that many people cannot afford to make ends meet in the UK currently. However, even people who can afford to stay in their homes are looking at reducing their non-essential spending.
Some areas that people are intending to cut back on are: fashion, restaurants, and groceries (6). This is bound to have concerning effects on the economy, yet many people have no other choice if they want to be able to pay their bills and their mortgage or rent.
3. Inflation is the highest it has been for 40 years
Inflation in the UK is currently at a 40-year high, at 10.1% (7). This is particularly concerning when we compare this figure to the inflation rate in some other European countries.
The European Union average in August 2022 was 10.1%, so the UK is certainly not alone with its sky-high statistic. However, the inflation rate in France is just 6.6%, revealing that not every European country is suffering in the same way as the UK (8).
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4. People aged between 55-74 years are more likely to reduce their use of gas and electricity
We have covered the fact that older people are more likely to struggle with the cost of living crisis, so it is logical that they would be more likely to reduce their spending (9).
After all, most people are not working in their later years, so all they have to rely on is their pension and any savings they may have.
Many people prepared for retirement without being aware of the eventual cost of living crisis, so what was once deemed a good amount of savings and a good pension is now putting pensioners in a precarious financial situation.
This is extremely worrying given that they are more in need of heated homes and sufficient food.
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5. 1.3 million more people have been pushed into poverty
It has been predicted that 1.3 million people in the UK will enter poverty as a result of the cost of living crisis (10). This calls into question governmental measures, as they are evidently not solving the issue sufficiently if a large number of people will still be subject to poverty.
6. 78% of low-paid workers claim the cost of living crisis is the worst financial period they have ever faced
A survey of low-paid workers in the UK has revealed that 78% of low-paid employees believe the 2022 cost of living crisis is the worst financial period they have ever faced (11).
Generally, if the cost of living increases, this is reflected in higher wages. However, this hasn’t happened for most employees in the UK, which is why the 2022 crisis is so extreme for a large number of people.
Over 50% of low-paid workers in the UK have used food banks over the last year, which emphasises the significance of the situation (12).
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How Have the Cost of Living Crisis Stats UK 2022 Affected the Equity Release Scheme?
As the cost of living crisis continues to put families all over the UK at risk of entering poverty, schemes that provide financial aid are becoming increasingly popular.
The number of new equity release plans implemented between April and June 2022 was 26% higher than the figure for 2021, at an average of 200 plans per day (13).
This directly correlates with the higher inflation rate, revealing that more and more people are turning to equity release as a way of staying or becoming financially stable.
However, this is only possible for people who meet the requirements for equity release, so some people are forced to consider alternatives. To take out equity, you must be at least 55 years old, and you must own a home that is worth £70,000 or more.
Unfortunately, the people who have lost everything as a result of the cost of living crisis would not be eligible for equity release, as they would not be able to borrow against their property. We encourage these people to read our guide on keeping costs low during the current crisis.
It is also a good idea to check your eligibility for government schemes, whether it be Winter grants or means-tested benefits, as some people do not realising they could be claiming more than they currently do.
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Using Equity Release to Prevent Poverty
Why would people use equity release instead of taking out a traditional loan? The answer lies in repayments. With a traditional loan, it is expected that the individual will repay the money each month, so they must have the means to do this.
What’s more, before they are approved for a loan, their income and credit rating will be checked. This is problematic for many people as both their income and credit rating may have been negatively affected by the cost of living crisis. Sometimes, this disqualifies them from a loan.
On the other hand, with an equity release loan, there are generally no affordability checks. This means that even the lowest income workers could benefit from financial aid, provided that they have a property that is worth £70,000 or more.
Furthermore, most equity release plans do not involve repayments. This means that you can live as though you are not in debt, as all the money is yours to spend while you are alive.
The lender will take the money from the sale proceeds of your home when you pass away or enter permanent care.
As you can imagine, this is a great way to stay afloat during the cost of living crisis as you can access money to pay your bills each month, to pay off existing debts, or to fund essentials such as food and transport.
This would be possible using a plan that allows for monthly payments of the loan.
You could also opt for a lump sum lifetime mortgage, which would allow you to fund a significant purchase, and then rely on your pension to cover your day-to-day living costs.
For example, you could renovate your home and make it more disabled-friendly, which may reduce the amount you are spending on your disability overall.
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What Happens If I Take Out Equity and then My Financial Situation Improves?
If you release equity from your home and your financial situation improves, it is not the end of the world.
On one hand, it is true that equity release is difficult to back out of, so once you have taken out equity, it’s sensible to remain on the scheme. This is because you might have to pay out if you want to exit the scheme, so it is not a wise financial decision.
What’s more, taking out equity does put you into debt, and this can have an impact on the amount of inheritance you can leave to your family.
However, if your financial situation improves, you could save up the additional money you have with the intention of passing it on to your beneficiaries, so you would not have to worry about the inheritance side of things.
What’s more, as no repayments are necessary, your personal situation would only change for the positive.
The only downside would be that the equity release lender would take some money from your property sale when you die, but this would only happen after you pass away, so it would never affect you directly.
If you are concerned about interest racking up, we encourage you to select an interest-only scheme. This would allow you to repay the interest each month and keep the borrowed amount of money as low as possible.
Another option is a voluntary repayment scheme. If you ended up coming into money and no longer strictly needing your equity loan, you would be able to make a large repayment (or smaller regular repayments) on this scheme, so you would owe back a smaller amount overall.
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What Happens If My Equity Loan is Not Enough to Combat the Cost of Living Crisis?
Most people release enough equity to allow them to enjoy their retirement, whether that be to pay for luxury items or to cover the cost of bills, which puts them at ease each month.
There is never any reason to worry that your equity loan would be too low, as you will always know how much money you would have access to before you sign off on equity release.
You can see this for yourself by using our free equity release calculator and requesting a personalised quote. However, when you speak to an equity release adviser, they will ask questions about your finances and provide you with an accurate estimate.
If you then decide that the amount is not worth it, you would be able to look at alternatives to equity release. However, this rarely occurs, as most people are able to access 20-60% of the value of their property, which ends up being a significant amount of money.
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What Happens If I am Not Eligible For Equity Release?
If you are not eligible for equity release yet you need to find a way to boost your income, there are plenty of alternatives to equity release that we can suggest.
1. Returning to work
Firstly, if you are retired or heading towards retirement, is there any way you could hold off on this for a while and continue working? You could reduce your hours to avoid burnout if you are concerned about fatigue.
We know that this is not the preferred option for most people, but it may be the simplest way to ensure you are earning a steady income. You could even try to start your own business and control your own hours, or take on a part-time remote role.
With energy prices currently being so high, it may be a good idea to find a job that allows you to be in the office for at least part of the week.
This would mean you could charge up your electronics, make hot drinks, and use your devices without having to pay out of your own pocket.
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2. Means-tested state benefits
Secondly, you could look at claiming benefits if you are not currently doing so. Use a benefits calculator to figure out whether you are entitled to money from the government.
Some situations that increase your likelihood of accessing state benefits are: being a carer, having a child, having a disability, being unemployed, being elderly, and being a low-income earner.
Keep in mind that claiming benefits can impact a homeowner’s entitlement to equity release, so if this is something you want to do in the future, you would need to speak to an adviser about your eligibility.
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3. Traditional loans
Next, you could consider relying on traditional forms of loaning such as credit cards. This would be a great way to boost your credit rating, and it is also an excellent way of bridging finance.
However, this is only a viable option if you know you would be able to make monthly repayments, otherwise, you could get into irreversible debt. You would also have to pass the affordability checks, so if you are a low-income earner, it is not guaranteed that you would be approved for a credit card.
4. Budgeting
Another option is to cut down your spending as much as possible. There are currently many hacks in the media about reducing spending as the cost of living rises.
These include: cancelling ongoing subscriptions such as Netflix, keeping hot water in a flask instead of frequently boiling the kettle, and walking instead of driving.
It goes without saying that not everyone is able to reduce their spending in these areas; you may have a job you need to drive to, for example.
However, there is bound to be an area of your life that you can pay attention to and cut back your spending, which would have a positive impact on your general finances.
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5. Borrowing from loved ones
Some people choose to borrow money from their family when they are in dire straits. This is a sensible option if you know someone who can afford to lend to you, and if you are certain that you would be able to repay them within a reasonable timeframe.
Yet, given that the cost of living crisis is affecting everyone, you may not find anyone who is able to lend you money. This is why many people turn to loans to help them through tough times with their finances.
6. Downsizing
If you are willing to move home, downsizing could be a great way to reduce your spending in terms of your bills and mortgage. There will be fees involved with downsizing, but once the process is finalised, you could enjoy a lower cost of living.
Some people even choose to downsize and then take out equity from the new home. This would work if the new home was approved for equity release; it would have to be worth at least £70,000 and be in a suitable condition.
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7. Sell your items
Many people have plenty of old items they do not use anymore and are no longer benefitting from, whether it be clothes, furniture, or even devices.
Why not make the most of this and gather items from your home to sell? You could do this on social media, such as Facebook Marketplace or Vinted, to access a wide range of people. You could also get involved in a car boot sale if you would prefer to sell the traditional way.
8. Be energy efficient
Though the cap on energy bills will help us all, we cannot deny the fact that many households will struggle as a result of the higher costs. To combat this, you could be more aware of your use of energy, and implement strategies for efficiency.
For example, you could refrain from using your dryer, and instead, air dry all of your clothes on the washing line, or inside when the weather starts to turn.
Another key point is to make sure you are turning off your lights and appliances when you are not using them. Many people leave lights on unnecessarily, and being warier of this is a very easy way to save on energy bills.
Finally, try to charge up your devices in public places if possible. If you are at work all day, charge up your phone, laptop, and any power banks you may have. This may save you from having to charge your phone overnight, which would waste a huge amount of energy.
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Find Out How You Can Release Equity
The problem with alternatives to equity release is that most of them require you to already have a good amount of money, but some people are looking for ways to simply make ends meet.
This is why it’s a great idea to release equity if you are a low-income earner. You could access an equity loan in an extremely short amount of time (usually 6-8 weeks) without needing to prove that your income is high.
There are various fees involved with equity release (e.g. application fees, administration fees and legal fees), so it is preferred if you can afford to pay for this outright.
However, if you are not in a position to do this, you could request for the fees to be deducted from your equity loan before you receive it. This means it is never necessary for you to have plenty of money in the bank to take out equity.
To get started with equity release, get in touch with us and we will talk you through the process. Our advisers will ask you about your financial situation and tell you exactly how equity release could improve your finances, particularly during the current cost of living crisis.
We can be reached on 0330 058 1579, and we are also happy to give you a call if you fill out your details here. The more we know, the better, so we encourage you to do your research on our website before booking a free initial consultation with us.
You can browse our plans page to find out about the different equity release plans that are available, and how each one could improve your financial situation.
Our help centre teaches you about the nuances of equity release, including links to interest rates, tax, and costs.
Finally, our blog includes useful information about a range of subjects that are linked to equity release, including a post all about the cost of living crisis.
We hope you have a better understanding of what the cost of living crisis is and why it has occurred.
However, most importantly, we hope that you are aware of the tools that are available to you during this crisis, whether it be government schemes, traditional borrowing schemes, or modern borrowing schemes (such as equity release).
Please call our 24-Hour Helpline: 0330 058 1579
References
[1] The Effect of the War in Ukraine on Global Activity and Inflation https://www.federalreserve.gov/econres/notes/feds-notes/the-effect-of-the-war-in-ukraine-on-global-activity-and-inflation-20220527.html
[2] National Living Wage Increase boosts pay of low-paid workers https://www.gov.uk/government/news/national-living-wage-increase-boosts-pay-of-low-paid-workers
[3] £400 energy bills discount to support households this winter https://www.gov.uk/government/news/400-energy-bills-discount-to-support-households-this-winter
[4] Truss energy bill freeze brings little cheer to struggling households https://www.theguardian.com/business/2022/sep/08/truss-energy-bill-freeze-struggling-households
[5] Homelessness rises 11% in first three months of year https://www.insidehousing.co.uk/news/news/homelessness-rises-11-in-first-three-months-of-year-76756#:~:text=According%20to%20Shelter%2C%20the%20homelessness,the%20same%20period%20in%202021.
[6] 90% Of Households Plan To Reduce Non-Essential Spending Over Next Year – Report https://www.kamcity.com/namnews/uk-and-ireland/general/90-of-households-plan-to-reduce-non-essential-over-next-year-report/
[7] UK inflation hits new 40-year high of 10.1% as food and energy price surge continues https://www.cnbc.com/2022/08/17/uk-cpi-inflation-july-2022.html
[8] Harmonized index of consumer prices (HICP) inflation rate of the European Union in August 2022, by country https://www.statista.com/statistics/225698/monthly-inflation-rate-in-eu-countries/#:~:text=As%20of%20August%202022%2C%20the,the%20EU%20during%20this%20month.
[9] What actions are people taking because of the rising cost of living? https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/articles/whatactionsarepeopletakingbecauseoftherisingcostofliving/2022-08-05
[10] Cost of living crisis: lack of support will push 1.3 million into absolute poverty, economists warn https://www.independent.co.uk/news/business/news/cost-of-living-crisis-poverty-economists-b2042856.html
[11] 78% OF LOW-PAID WORKERS SAY COST-OF-LIVING CRISIS IS THE WORST FINANCIAL PERIOD THEY HAVE EVER FACED https://www.livingwage.org.uk/news/78-low-paid-workers-say-cost-living-crisis-worst-financial-period-they-have-ever-faced
[12] Cost of living driving low paid workers to food banks https://www.hrmagazine.co.uk/content/news/cost-of-living-driving-low-paid-workers-to-food-banks/
[13] Pensioners turning to equity release in record numbers to deal with cost of living crisis https://www.express.co.uk/finance/personalfinance/1649688/equity-release-record-numbers-pensioners-cost-of-living-crisis
