Demand for debt services among Lloyds Bank customers has jumped by 30% in the first six months of the year, as the cost of living crisis takes its toll.
Amid a squeeze on living standards, research from the bank indicates three-quarters of its 26 million UK customers were worrying about rising prices and the impact it is having on their savings.
The chief executive of Lloyds, Charlie Nunn, said that customers were working to get a grip on their finances by consolidating their debts.
Cost of living: 2m households missed bill every month this yearRead more
Nunn added that eight in 10 of its customers have less than £500 of savings in their current and savings accounts.
Lloyds Banking Group is the country’s largest mortgage lender and is often considered a bellwether for the UK economy.
According to its research, 20% of its customers are already cutting back on their discretionary spending to make sure they can cover the cost of essential items.
“Customers are concerned, and they should be,” Nunn told the BBC. “We have seen some areas where there’s real points of challenge.
“About 80% of individuals and UK customers and families have less than £500 worth of savings in their current account and their savings account. They might have money elsewhere but what we can see is less than £500.”
Despite the sharp increase in customers dealing with problem debts, Nunn said that only 1% were unable to pay their usual bills.
Inflation in the UK soared to a 40-year high of 9.1% in May, and is predicted to rise as high as 11% later this year, amid soaring costs of energy, food and raw materials.
The lender reported in the spring that its customers were already beginning to tighten their belts, with more than 1 million cancelling their gym memberships and video streaming contracts.
Lloyds said last month it would give more than 64,000 of its staff a £1,000 bonus to help them with the cost of living.
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Nunn, who took over as chief executive at the banking group in August 2021, said Lloyds customers were concerned about the economy, but cautioned there was a danger that the UK could be talking itself into a recession.
“We are concerned that I think we collectively are talking ourselves into the risk of too negative an outlook,” Nunn said.
“There are pockets of strength in the economy. There are significant parts of the consumers in the UK who have strength and really want to spend and create that demand and we can continue to see opportunities to invest in growth.”
Travel is one of the spending bright spots, the group said, reporting that credit card spending on holidays was up 300%.