The increasing cost of living and rising interest rates are causing more people to become ‘trapped in poverty.’

According to a new analysis, the number of British households struggling with significant debt has increased by two-thirds since 2017.

Debt Justice, a charity that campaigns against unjust debt, has discovered that approximately 12.8 million adults in the UK need to catch up on their expenses or find repayments a burden. 

It urges immediate action to prevent individuals from being “trapped in poverty.”

The findings come after the Bank of England raised interest rates to a 15-year peak of 5% last month. 

The financial markets now anticipate that the Bank will raise rates to a maximum of 6.25% by the end of the year. Debt Justice executive director Heidi Chow stated, “The government is turning a blind eye to the colossal household debt crisis that is rapidly engulfing millions of people.”

Instead of neglecting the problem, they should increase incomes, strengthen protections for people in arrears, and forgive unpayable debts to give everyone who needs it a new beginning.

In 2017, according to the Financial Conduct Authority‘s (FCA) financial lives tracking survey, 7.7 million adults in the UK were over-indebted, meaning they had missed payments for credit commitments for three or more months or were experiencing a heavy financial burden from their expenses.

The survey conducted in May 2022 revealed that 9.6 million Britons were struggling with debt, compared to 12.8 million in January of this year. 

Debt Justice asserts that there is insufficient assistance for individuals struggling with debt at a living crisis’s expense.

A community worker from east London, 47 years old, who told the charity about the effects of debt, said, “My health began to deteriorate, and I had to undergo a significant operation. Subsequently, I needed time off to recover, so my pay decreased even further. My debt grew exponentially until it reached £15,000.” “I used credit cards and borrowed money. I did everything possible to pay off the accumulating debt. I was placed in an untenable circumstance.”

Individual voluntary arrangements, or (IVAs) are formal and enforceable agreements to repay debts to creditors over a specified period. 

In England and Wales, 87,967 IVAs were registered in 2022, the highest total since 1990.

Concerns have been raised that unscrupulous companies have targeted individuals with substantial debts to promote IVAs. Citizens Advice has warned that some businesses have been “preying on and profiting” from debt-ridden individuals.

Last month, the FCA announced a moratorium on companies receiving referral fees from debt solution providers. It discovered instances in which customers in financial distress were recommended IVAs that would have caused more injury.

One destitute person was advised to enter into an IVA costing £6,000, even though they could have been debt-free in one year for £90 with a debt relief order, a low-cost debt remedy designed for individuals with relatively low debt levels.

Debt Justice warns that the cost of living crisis and high-interest rates threaten to trap people in poverty for years to come and serve as a drag on the economy. It desires a new strategy from the government to address the crisis, including a moratorium on all evictions and the use of bailiffs to collect household debts.