The document discusses changes in household budgets and the factors influencing affordability, highlighting the rising costs of living, including rent, mortgages, and council tax. It emphasizes the shift towards a new model of understanding debt problems and the importance of assessing affordability to ensure long-term financial well-being. Additionally, it underscores the necessity for transparency and common financial statements in managing debt and repayments.

1. Household budgets have
substantially changed over recent
years - what now determines
affordability?
Claire King, Insight Manager, Money Advice Trust
Jane Tully, Head of Insight and Engagement, Money Advice
Trust
Martin Roseweir, Managing Director, Allied International Credit
Presenters:
Yvonne MacDermid OBE, Chief Executive, Money Advice
Scotland
Facilitator:
Vanora McCullagh, Creditor Liaison Manager, Debt Advisory
Line and representing MALG’s Midlands Discussion Forum
Scribe:

2. Inflation has outstripped wages

3. Rising costs of living: Rent
! More people are struggling with
rent arrears
! Growth in demand for private
rented properties. Private renters
now the 2nd largest tenure in
England
! Renters (private and social) tend
to spend proportionally more of
their income, on housing than
mortgagors
! Cost of renting privately is soaring
! For those renting socially, welfare reforms are having an impact on
capacity to meet rent payments

4. Rising costs of living: Mortgage
! Propor%on
of
households
in
mortgage
arrears
and
possessions
rose
steeply
following
the
crash
in
2007,
but
is
slowly
declining
! Mortgage
holders
have
been
protected
by
low
interest
rates
in
recent
years,
but
many
may
not
be
able
to
swallow
a
rise
in
interest
rates
! Those taking out mortgages now are paying more than before

5. Rising costs of living: Council Tax
! Council tax arrears are our
fastest growing debt for the
past 2 years.
! May partly be due to changes in
council tax benefit impacting on
low income households

6. Impact on debt
Propor%on
of
Na%onal
Debtline
clients
who
in
arrears
with
household
bills

7. The changing debt landscape

8. A new model of debt problem
! ShiA
from
‘change
of
circumstance’
focused
to
‘deficit
budget’
focused
model
of
debt
problem
! Households
are
puFng
themselves
at
financial
and
personal
risk
in
an
aHempt
to
cut
back
Propor%on
of
households
in
each
income
quin%le
without
home
contents
insurance

9. Determining affordability: why a
budget works
! Opens up discussion
! Gives clarity
! Provides transparency
! Drives an holistic
approach
! Supports long-term
financial wellbeing

10. Determining affordability: a
common approach
! The role of the Common
Financial Statement
! A new Single Financial
Statement

12. Journey
of
assessing
affordability
Total
Expenditure
Disposable
Income

13. How
do
we
validate?
• Trust
• Conversa%on
• Sustainability
• Compliance
• Training
(Ques%oning
and
understanding
household
budgets)
• Debt
Advice
Audits
• Common
Financial
Statement

14. Why
is
understanding
affordability
important?
• TCF
Trea%ng
Customer
Fairly
is
now
embedded
into
organisa%ons
and
really
adds
emphasis
on
how
we
deal
with
customers
•
Regula%on
CONC
sourcebook
sets
the
expecta%ons
•
Sustainability
Reducing
unnecessary
contact
with
the
customer
due
to
non-­‐payment
•
Signpos%ng
Ensures
the
customer
is
aware
of
all
op%ons

15. How
do
we
make
it
work?
Agency
Customer
• Repayment
book
• Absorbing
upfront
costs
• Increasing
and
developing
training
• Recruitment
process
• Peace
of
mind
• Affordable
/
Sustainable
• Trust
• Improving
percep%on

16. Impact
of
Reducing
Disposable
Income?
In
the
last
18
months
our
average
payment
has
decreased
from
£25.60
to
£22.27
We
have
14.21%
of
customers
dealing
with
a
financial
advice
company
compared
to
12.55%
12
months
ago

17. Repayment
Value
Variance
Fee
Charging
Fee
Charging
Free
Money
Advice
Fee
Charging
Free
Money
Advice
Fee
Charging
Free
Money
Advice
£19.68
£20.97
£23.04
£25.04
£26.27
£28.49
£35.70

18. What
%
of
a
customers
disposable
income
should
be
accepted
as
a
repayment?
What
is
acceptable
as
expenditure
on
a
Financial
Statement?