According to a report, low-income households have accumulated an expensive debt and are vulnerable to shocks.

Low-income households have accumulated loans for loans, credit cards and other consumer debts faster than any other group since the financial crisis, leaving them overexposed to another economic shock, according to a new study.

Much of the increase in consumer credit since the financial collapse has occurred in high interest products, including store cards and overdraft collection rates that average 20 percent, the Resolution Foundation said.

The expert group said fears of another crisis fueled by too much consumer debt are exaggerated, but urged policy makers to focus on combating the negative effects of indebtedness among potentially vulnerable groups.

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It occurs when Santander became the last bank on the main street to increase the interest rates of its overdrafts to 39.9 percent.

The lender joins HSBC, Barclays, First Direct, M&S Bank and Nationwide, who have responded to the new rules that prohibit daily overdraft fees by increasing the APR they charge.

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1/50 January 14, 2020

Huge waves hit the seawall in Porthcawl, Wales, when winds of up to 80 mph from the Brendan storm caused disruptions throughout the United Kingdom.

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2/50 January 13, 2020

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34/50 December 12, 2019

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42/50 December 4, 2019

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43/50 December 3, 2019

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44/50 December 2, 2019

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50/50 November 26, 2019

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25/50 December 21, 2019

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Pennsylvania

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Pennsylvania

31/50 December 15, 2019

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32/50 December 14, 2019

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EPA

34/50 December 12, 2019

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AFP through Getty

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37/50 December 9, 2019

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AFP through Getty

39/50 December 7, 2019

Speedo Mick outside the stadium before the Premier League match between Everton and Chelsea at Goodison Park

Action images through Reuters

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The SNP leader, Nicola Sturgeon, with the SNP campaign bus in front of Queensferry Crossing, while in the General Elections campaign in Scotland.

Pennsylvania

42/50 December 4, 2019

The Christmas tree in Trafalgar Square, which the city of Oslo gives each year as a show of Norwegian gratitude to the people of London for their help during World War II.

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43/50 December 3, 2019

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50/50 November 26, 2019

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Pennsylvania

The Resolution Foundation said general consumer debt levels are below the peak reached before the last recession. Loans that exclude mortgages accounted for 15 percent of total income last year, compared to 19 percent in 2008.

But the average hides various experiences with debt for different income groups in the last 12 years.

For example, when comparing the 2006-2008 period with 2016-2019, there was an increase of 13 percentage points in the proportion of low-income households (defined as the fifth bottom of the erner) that used a credit card. Among those in the middle there was an increase of 4 points and in the upper fifth only an increase of 2 points.

There was also a 4 percentage point increase in the proportion of households in the lowest income quintile that used overdrafts compared to a 2 point increase between those in the middle and a 1 point drop among those above.

The increase has coincided with an unprecedented period of stagnant wages, along with the decline in savings, suggesting that low-income households have increased their income with an expensive debt.

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Less than half of low-to-middle-income families reported having savings in 2016-17, which represents an increase of 15 percentage points since the financial crisis and left them exposed to a period of difficult times.

Kathleen Henehan, policy analyst at the Resolution Foundation, said: “Access to new credit can be enormously beneficial for low-income families, but many also report that they have no savings to turn to, these high payment pressures from the Debt are a sign of stretched living standards.

“The risk is that this leaves them too exposed to future financial shocks, which reinforces the need for policy makers to focus on the living standards of people with low and middle income.”

While low-income households have obtained increasing amounts of expensive and unsecured loans, richer households have disproportionately benefited from record low mortgage interest rates.

Those in the highest family income quintile are more than three times more likely to access mortgages than those in the fifth fifth.

Recent research by the Bank of England concluded that low interest rates were the main driver of rising housing prices over the past four decades, not shortage of supply, as suggested.

“Almost all of the increase in the average price of housing in relation to income can be seen as a result of a sustained, dramatic and consistently unexpected decrease in real interest rates,” the researchers wrote.

There has been a jump in average housing prices of 52 percent from a low point in 2009 that generates billions of pounds of property wealth, and older and richer households enjoy most of the profits.

Savills real estate agents discovered that the total value of the UK housing stock reached a record of £ 7.4 billion last year having increased £ 2.7 billion in the last decade alone. 46 percent “unprecedented” of the wealth of the owners is now in the hands of those over 65, said Savills.

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