Problem debt and the burden of debt, by income
About 2 mins
Key points
- On average, working-age people living in higher-income households are less likely to experience problem debt or to feel that their debt is a heavy burden than in lower-income households.
- 8% of working-age people on the lowest incomes (the bottom fifth of incomes) live in a household with problem debt, compared with less than 1% in households on the highest incomes (the top fifth ).
- One in six (15%) working-age people on the lowest fifth of incomes live in a household where at least one adult considers their debt a heavy burden. This drops to just 1% in the top fifth of income.
Being in problem debt can harm people’s physical and mental health by causing strain and stress, reducing income available for products and services that promote good health, or increasing health-harming coping behaviours. Poor health can also increase the possibility of problem debt, for example when someone loses their job or has a low income. This can create a cycle of problem debt and poor health.
This chart shows the proportion of people living in a household with problem debt and the proportion who are living in a household where at least one adult feels their debt is a heavy burden, for each income quintile in 2020–22.
- Working-age people on lower incomes are more likely to be in a household experiencing debt problems than people on higher incomes.
- In the lowest fifth of incomes, 8% live in a household experiencing problem debt, while in the top fifth, less than 1% live in a household experiencing problem debt.
- In households on the lowest fifth of incomes, 15% consider their debt a heavy burden, compared with 5% on the next fifth of incomes and just 1% on the highest fifth of incomes.
Our analysis on debt and health, which looks at how likely people are to be in debt, shows that people on the lowest fifth of incomes are less likely to be in debt – around 45% compared with almost 60% on the highest fifth of incomes. But people on the lowest incomes who are in debt are more likely to spend a higher proportion of their income on debt repayments. In the lowest fifth of incomes, 18% spend more than 20% of their income on repayments, and nearly one in ten (9%) spend over 40%. For people on the highest fifth of incomes the equivalent figures are 9% and 3%.
A household is defined as being in problem debt if it falls into one – or both – of the following two groups:
- Liquidity problems:
- household debt repayments represent at least 25% of net monthly income, and at least one adult in the household reports falling behind with bills or credit commitments, or
- the household is currently in two or more consecutive months’ arrears on bills or credit commitments, and at least one adult in the household reports falling behind with bills or credit commitments.
- Solvency problems:
- household debt represents at least 20% of net annual income and at least one adult considers their debt a heavy burden.
This analysis uses financial debt, which is the money owed on credit cards, loans and other non-mortgage debt but excludes property debt and council tax.
A person is classed as living in a household that considers their debt a heavy burden if they live in a household where at least one adult considers their debt a heavy burden. This is a subjective measure.
People were asked: ‘Thinking about the [overdraft(s)/credit card(s)/store card(s)/credit agreement(s)/loan(s)/bill payments] you have just told me about, to what extent is keeping up with the repayment of them and any interest payments a financial burden to you?’ This analysis looks at the proportion of all respondents who live in a household that finds debt repayments a ‘heavy burden’. Other options include ‘somewhat of a burden’ and ‘not a problem at all’.
The income quintiles are based on net equivalised (adjusted for household size) household income after housing costs have been deducted from income. People are grouped into 5 equal-sized bands (quintiles). The first quintile represents the lowest 20% of incomes and the tenth decile represents the highest 20% of incomes.
Source: Office for National Statistics, Wealth and Assets Survey, Great Britain, 2020-22
