The latest figures from the Insolvency Service for England and Wales shine a light on the worsening state of household finances, with personal insolvencies reaching 117,947 in 2024 – an increase of 14% compared to 2023.
Debt Relief Orders (DROs) also reached their highest annual number on record.
However, this is likely to have been influenced by the removal of the £90 administration fee in April and the expansion of eligibility criteria in June 2024.
Our recent Pepper Money Specialist Lending Study provided further insights into the increasing debt being accrued by UK households. Nearly a third of people with adverse credit said they have unsecured debts exceeding £5,000, and 41% have seen their debt increase over the past year.
Additionally, the growth of buy now, pay later (BNPL) services has contributed to this trend, with 44% of users saying their BNPL debt levels had increased in the last year. With BNPL credit now widely available to fund purchases from clothes to kitchens, the ease of access to this type of borrowing is adding to household debt burdens, making financial management more complex for many families.
These are concerning statistics, but they represent an opportunity for brokers to provide potentially life-changing advice for customers, with support on managing and restructuring their debts effectively. Proactively addressing debt issues before they reach a critical point, like insolvency, can shore up a borrower’s finances and provide them with a foundation to build for the future.
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In this context, debt consolidation can represent an important strategic financial tool for borrowers managing multiple unsecured debts. Through either a remortgage or a second charge mortgage, consolidating debts into a single, structured monthly payment can help customers achieve greater financial stability, improve cash flow, and support more effective long-term planning. By simplifying their debt obligations, borrowers can create a clearer pathway to managing their finances while also putting themselves in a stronger position for future mortgage applications.
Debt consolidation may not be the right option for everyone. A comprehensive assessment of every customer’s financial circumstances is essential, and you can play a pivotal role in this process. By thoroughly understanding your customers’ circumstances and future aspirations, you can help to build a path that helps them manage their current debt and build for the future.
When it comes to raising finance for debt consolidation, many borrowers may have concerns about being declined by a high street lender because of their debt levels, or maybe any missed payments they have picked up. But this doesn’t have to stand in their way.
At Pepper Money, for example, our flexible approach enables us to support customers who may have been turned away elsewhere. We provide mortgages for those customers who are just off the high street and we don’t impose maximum debt-to-income ratios. Instead, we evaluate each case on its unique merits, which means we can help customers with higher levels of debt and missed payments on their credit file.
The cost-of-living crisis may have held a tight grip on the finances of the nation’s households, but there is an opportunity to help them regain control over their financial health. Debt consolidation can support this by addressing immediate financial pressures and facilitating more effective financial management. For brokers, this represents not just a business opportunity but a chance to demonstrate leadership and provide meaningful support to your customers.
