The protection specialist says that with the average wage at £26,500 and average house price at £186,000, borrowers are already financially stretched before having to pay their next two biggest expenditure items; housing, fuel & power costs and transport.
ONS household spending figures recently released for 2012 show housing, fuel and power costs overtook transport as the main drain on the nation’s finances.
CML figures also illustrate the squeeze on borrowers; 25 years ago a first-time buyer paid a deposit of £1,500 to borrow £29,000 – 2.22 x their annual income, now it’s a £31,000 deposit to borrow £123,000 at 3.47 x annual income.
British Money director Alexander Burgess said: “Income is rapidly being outpaced by expenditure and borrowers have no capacity for saving, leaving them facing a protection abyss rather than gap. All it needs is a simple change in circumstance to tip them into debt. Lenders need to be attuned to this and act accordingly. The cost of income protection is far lower than the resultant debts that will build up by not having it – something many families may be unable to recover from.”