Monday, March 22, 2010
Category:
Consolidation
According to new research conducted by uSwitch.com, the freezing winter and a ‘lack of significant price cuts’ have caused UK households to fall into deeper debt with energy suppliers.
In fact, it has been estimated that consumers now owe £728 million in energy bills, despite a ‘dip’ in the number of people who are in debt.
It was found that 5.5 million households owe money to energy suppliers, whereas this figure stood at 6.5 million in 2009. Nevertheless, findings have shown that the average sum now owed is £132 compared to £126 in 2009, and £114 in 2008. The research showed that 41 percent of those who owe money to their energy supplier now owe more than they did a year ago, whilst 17 percent now owe less. uSwitch.com points out that this indicates that many households are ‘still struggling to get to grips with the 42 percent or £381 hike in prices in 2008’.
When it comes to repaying energy suppliers, it was found that 25 percent are planning to make a lump sum payment and 40 percent are intending to increase their direct debit. A further 8 percent are thinking about agreeing a repayment plan with their supplier, and 5 percent are considering moving onto a prepayment meter.
Director of Consumer Policy at uSwitch.com, Ann Robinson, commented: "The impact of the 42% or £381 hike in energy prices in 2008 cannot be underestimated - consumers are still feeling the pain and subsequent price cuts have done little to ease this. The fact remains that consumers have been left facing bills that are £297 or 33% higher than at the beginning of 2008. This has clearly taken its toll with the average amount owed on energy bills increasing by 16% since 2008, yet again raising serious concerns about the affordability of energy in this country.
"Energy debt can be a catch-22. Despite knowing they could reduce their bills by moving to a lower cost energy plan, consumers may perceive debt to be a barrier to switching. In fact Ofgem has worked with suppliers to minimise the number of switches blocked due to debt.
"The increase in energy debt this year is symptomatic of the fact that we are entering an era of high cost energy. Households will have to adapt if they are to protect themselves from spiralling energy bills. There are two key steps to this - make sure you are paying the lowest possible price for your energy and cut down on the amount of energy you use. Consumers should also make sure that they or their supplier are taking regular meter readings as relying on estimated bills can be a shortcut to debt. Any consumers who are concerned about managing their energy bills should contact their supplier to discuss the options."
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Homeowners whose finances are tight at the moment could consider taking out a secured loan to ease the pressure. For example, a secured loan for
consolidation could allow borrowers to tie up any existing credit cards or personal loans that may be proving expensive. One of many finance options available, this financial solution could leave borrowers with more money each month as a result of lower monthly outgoings. However, if opting for a secured loan to consolidate debt, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
