Households are running out of financial resilience as debt pressures grow, Equifax warns

Millions of UK households could be nearing the limits of their financial resilience, as shrinking savings buffers collide with rising living costs, analysis from Equifax UK found.

The credit reference agency’s latest Financial Health Report found that while consumers successfully adapted to the cost-of-living crisis over the past year, many households are now showing signs of what Equifax describes as “adaptation exhaustion”.

According to the report, consumers said they would need more than £20,000 in savings to feel financially secure, but currently hold an average of just £6,188 in savings accounts.

At the same time, Equifax’s newly launched UK Market Pulse Index, a diagnostic measure of national financial resilience, has flattened at 60.4, indicating that many pandemic-era savings cushions have now been depleted.

The report highlighted mounting pressures facing households in 2026, including forecasts of a potential 20% increase in the Ofgem energy price cap from July, which could push the average annual dual-fuel bill to around £1,973.

Mortgage pressures also remained significant.

Mortgage lending rebounded by 14.9% in 2025 compared with 2024, but consumers are increasingly stretching borrowing terms to maintain affordability.

Equifax found that 11% of all new mortgage lending in 2025 involved terms exceeding 35 years, compared with just 3.5% in 2022.

The report also noted that almost 300,000 mortgage borrowers switched to interest-only products or extended mortgage terms between July 2023 and October 2025 as a way of coping with higher monthly costs.

Outstanding UK credit card debt reached a record £79.2bn in 2025, although Equifax said many consumers were managing borrowing strategically through the use of interest-free offers and changing spending behaviour.

The analysis also identified growing financial strain among traditionally more financially secure households.

Personal insolvencies increased by 10% during 2025, with higher-income households and homeowners increasingly represented in new Individual Voluntary Arrangements (IVAs).

Homeowners accounted for 17% of new IVA entrants, with mortgage costs now exceeding average rental payments for many affected households.

Equifax also highlighted wider structural inequalities in financial resilience.

The report identified a gender-based financial health gap among Millennials aged between 30 and 45, while this same age group was found to be paying almost 20% more in mortgage repayments than consumers aged between 62 and 80.

Paul Heywood, chief data and analytics officer at Equifax UK, said: “The UK consumer’s ‘Great Recalibration’ in 2025 was a triumph of adaptive resilience, but 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.”

David Bernard, general manager UK&I at Equifax UK, said: “Since the global pandemic, we have tracked a period of high volatility, from the ‘mortgage shock’ of 2023 to the cost-of-living spiral that forced millions to re-evaluate their financial security.

“But the positive news is, we are moving to a world of proactive inclusion, thanks to more robust data and analytics that can be used in technology and consumer regulation.

“Despite new challenges ahead, this combination will help businesses better understand the ever-changing financial landscape and continue to work to build a credit market that better serves all consumers and helps them live their financial best.”