British households have a diminished ability to cope with financial shocks, a study from credit ratings agency Equifax has shown.
Equifax said families have “diminished financial buffers” after a year of adapting to the rising cost of living. Impending energy price cap rises and ‘higher-for-longer’ interest rates could push millions to their limits, the company said.
Paul Heywood, chief data and analytics officer at Equifax UK, said British people had recalibrated in 2026, using interest-free credit and changing their spending habits to cope with rising costs. Selling and buying items second-hand helped with this, but Heywood said the UK consumer had now reached a point of exhaustion with adapting to spending changes.
He continued: “We could now be at a turning point. As buffers dwindle, consumers’ ability to absorb further economic shifts has been diminished and the potential for incoming energy price spikes and sustained pressure from high borrowing costs could push millions to the limits of their adaptive capacity.
“The traditional image of financial discomfort is also changing, as asset-rich households and those in their prime working years increasingly grapple with debt due to elevated living and housing cost pressures.”
Mortgage terms and homeowner debts both rise
Mortgage lending saw a rebound of 14.9% growth in 2025 compared to 2024, Equifax said. However, 11% of all new mortgage lending exceeded 35-year terms, up from 3.5% in 2022, as borrowers tried to deal with rising prices. Analysis by Quilter last year showed that the number of mortgage borrowers taking out loans that they will still be repaying in retirement have soared by 156% in five years.
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The Equifax figures also showed that pandemic-era savings have now been depleted, the average amount owed on energy bills is rising and UK consumers have a £13,000 gap between their desired saving level and their current savings.
The percentage of homeowners with an individual voluntary arrangement (IVA) to deal with problem debt rose from 10% to 17% in just two years.
Heywood said borrowers are also facing the prospect of higher-for-longer interest rates. This follows nearly 300,000 mortgage borrowers having already switched to interest-only products or extended mortgage terms between July 2023 and October 2025 as a coping mechanism.