A third at risk of debt due to energy cost hikes - Norfolk charity warns

It comes at a time when borrowing is expected to become more expensive after the Bank of England raised its base rate to 2.25pc.

Although only mortgages are directly affected by the base rate, usually the Bank's decision sees interest on credit cards and loans increasing as well.

With inflation at 9.9pc and expected to continue rising until it peaks at more than 11pc, many households are turning to credit to pay for everyday essentials.

Research carried out by YouGov on behalf of Smart Money People found that 47pc of adults in the East of England will have some form of new credit over the next year due to the cost of living crisis.

A fifth (20pc) of these borrowers will do so to cover day-to-day expenses.

Norfolk Citizens Advice said that its own data "reinforces the expectation that at least a third will go into debt due to energy cost increase".

Mark Hitchcock, chief executive at the charity, said: "We are working on data in light of the revised energy cap announcement.

"My feeling at the moment is that it will slow the rate at which people fall into energy poverty and financial debt but many have fallen into this type of crisis already this year and the caps will not mitigate this."

Mark Hitchcock from Norfolk Citizens Advice (Image: Norfolk Citizens Advice)

The base rate hike could exasperate the cost of living crisis as mortgage borrowers see their repayments soar.

UK Finance, which represents the finance industry, said that homeowners with deals that directly track the base rate will see their payments increase by around £49 per month on average.

Those on fixed rates will see no initial change, but will likely see their repayments rise when they come to the end of their current deal.

The Bank's decision, along with the general economic climate, could also see regulated lenders, such as banks, become more restrictive about who they are willing to lend to.

Borrowers with poor credit ratings - who are often on lower incomes and find it harder to cope with rising costs - could see themselves locked out of traditional forms of credit.

The Norfolk Community Law Service (NCLS) is a local charity that provides debt advice and usually deals with the most financially vulnerable people.

Mariusz Zaborowski from the charity said that they are expecting that more people will get into debt to pay for everyday living this winter.

"People who come to NCLS often cannot borrow money from anywhere," he added.

Mariusz Zaborowski from Norfolk Community Law Service (Image: Norfolk Community Law Service)

"Their credit rating is so bad that their only additional source of income, apart from the family are social loans.

"We expect that they will simply start getting into more and more debt with utility companies or for those who are on prepayment meters, they will run out of money or cut down on their other essential expenses like food.

"People do not report their meter readings - smart meters are the exception - they pay the estimated monthly rate over a long time and live in fear that there may be a looming debt in the future.

"Somebody will come, read their meter and leave them with a lot of debt."

Mr Zaborowski said that between April and June 2022 the average debt amount NCLS clients had increased by 56pc from the same period the previous year - at £17,528 April to June 2022 compared to £11,239.

"The average amount of utility debt reported to us has gone up from £1,116 to £2,484, which is an increase of 112pc," he said.

"We have also seen a 30pc increase in demand.

"So far in 2022 the average number of enquires that come to our debt advice service is 52 a month, this is compared with an average 40 a month during 2021."

People struggling with debt or finding it difficult to cope with rising costs should consider getting advice from a free debt charity such as Citizen Advice Norfolk 0800 144 88 48.