‘Squeezed Middle’ Seek Credit Ahead of Bleak Autumn

LONDON, July 13, 2011 -

There has been a surge in the number of lower middle class
families seeking credit in the past three months as they prepare
for a prolonged period of economic stagnation, a new study has
found.

The quarterly Credit Confidential Credit Index prepared by the
Centre for Economic and Business Research shows a significant
increase in lower middle class households applying for href="https://www.creditconfidential.com/credit-report">credit
over the past three months as they believe it will be increasingly
hard to get in the coming year.

However, despite this surge in credit applications, lower middle
income households are seeing fewer loans approved than both their
wealthier and poorer peers. Almost six in ten (59 per cent)
short-term unsecured loans for lower-middle class households have
been rejected, compared to just 31 per cent of upper and
upper-middle class and one in five (22 per cent) for people from
poorer backgrounds. This has left many lower middle class families
without access to the credit that is increasingly important for
everyday consumer spending.

Paul Lewis, Vice President of href="https://www.creditconfidential.com/">Credit Confidential,
said: “The prolonged economic chill is changing the way people get
into debt. Increasingly, it seems people are taking on credit to
pay for everyday essentials, and not just major purchases. With the
autumn still ahead, they are stockpiling credit now hoping it will
get them through, as they fear it will be harder to come by later
in the year.”

The middle class credit crunch comes as the better-off seek to
benefit from the economic circumstances. A third (33%) of
high-income households have decreased their levels of debt over the
past year as they take advantage of the prolonged low interest
rates before an expected increase later in the year. This compares
to a worsening situation for the lowest income households, more
than a quarter (27%) of which have increased their debt levels over
the last year as they struggle to cope with rising inflation and
stagnant wages.

Paul Lewis continued: “The middle class and lower socio-economic
groups are the ones bearing the burden of the recovery, with lower
middle class families now displaying many of the economic
characteristics of worse-off social groups. If this trend
continues, more and more middle class families could fall prey to
the debt
traps that blight the nation’s poorest households.”

Heather Wilson, +44(0)20-3451-9419, heather.wilson at bbpr.com