Now the middle classes feel the pinch: Even those who earn £50,000 and above admit they’re cutting back on essentials as cost-of-living crisis grows
- More than a quarter of adults earning £40,000 to £50,000 are cutting back
- Families who usually consider themselves well-off are cutting back on essentials
- Bigger homes will also be hit by larger increases in energy bills this winter
- More than three in five said they were in ‘crisis’ with daily money management
Middle-class families who would normally consider themselves well-off are being forced to cut back on essentials as the cost of living crisis hits home.
More than a quarter of adults with an income of £40,000 to £50,000 admitted to slashing how much they spend on basics such as food between March and June this year.
And more than a fifth of those earning more than £50,000 said they, too, had cut back, a poll of nearly 5,000 people by the Official for National Statistics shows.
Those on lower incomes were hit even harder, with four in ten of them spending less on essentials.
But experts warned the figures showed how even higher earners were not immune from the effect of spiralling bills.
Separate research revealed that people earning between £70,000 and £80,000 were likely to be financially insecure.
More than half felt stressed about money, while 85 per cent had borrowed to meet basic financial needs, according to a survey of 10,000 employees by the financial consultancy Lane Clark & Peacock.
More than half of adults felt stressed about money, while 85 per cent had borrowed to meet basic financial needs, according to a survey of 10,000 employees (file image)
More than three in five added that they were in ‘crisis’ or vulnerable when thinking about their daily money management, with many resorting to payday loans.
Experts said wealthier households were likely to be feeling the squeeze because they ‘cut their coat according to their cloth’.
Those with a higher income typically spend more and have a bigger mortgage, leaving them with little more slack in their budget than those worse off.
Rising interest rates also mean a debt that looked affordable when mortgage costs were at a record low could soon become a serious financial burden.
The average two-year rate is now 3.95 per cent, up from 2.08 per cent in August 2020, according to the financial analysis firm Moneyfacts.
This would cost someone with a £400,000 home loan an extra £389 a month – or £4,668 a year.
Those with bigger homes will also be hit by larger increases in energy bills this winter as the price cap rises.
Many households are raiding savings they built up during lockdown to cover bill increases, leaving them more financially exposed.
The investment firm Hargreaves Lansdown expects the proportion of higher earners without the recommended minimum of three months of essential expenses set aside in savings to rise from one in four to just under one in three.
Heidi Allan, head of financial wellbeing at Lane Clark & Peacock, said: ‘Cost of living pressures do not only affect the lower-paid and those on benefits.
‘Our research suggests even mid and higher earners can face money worries in the current extreme climate.
‘A higher earner may be the only breadwinner in a family, or they could be of an age where they have older dependents as well as young adults that rely on them.’
Laura Suter, head of personal finance at the investment firm AJ Bell, added: ‘The scale of the price rises means middle earners are feeling the pressure, too.
‘If the price cap reaches £3,600 in October it means over the space of a year people need to find another £2,300 just to pay energy bills.
‘On top of all the other price rises, even a well-off family will start to see their disposable income evaporate.
‘What’s more, recent tax hikes such as the freeze on income tax thresholds and changes to national insurance are hitting middle earners hard, too.
‘Many of these people will have built up savings during lockdown, but will be raiding them now to pay for higher bills.’