One in four people don’t have enough savings to cover a 25 per cent drop in earnings – and that rises to almost one in two people who privately rent. 

The ‘cover 25 per cent drop’ measurement is the one used by the government’s Office for National Statistics to assess ‘financial resilience’ in household budgets.

Amongst others measured this way, 55 per cent of single parents fail to have enough, and 34 per cent where the main earner has a long-term illness or disability.

Rohit Kohli, director at independent broker The Mortgage Shop, says: “The ONS report paints a sobering picture of the UK’s current economic landscape. Vulnerable groups – notably disabled adults, renters and single parents – are disproportionately struggling. Despite a fall in inflation, the cost of essentials has surged, with some items seeing over a 25% price increase in two years. This trend strains household finances, particularly for necessities. The mortgage sector hasn’t fully felt the impact yet, but with a tough winter ahead, many face harsh choices between heating, eating or paying their mortgage or rent.”

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, adds: “The ONS measures resilience primarily through our ability to weather the storm if we lost 25 per cent of our income. However, it also looks at a number of other areas. 

“Among renters, 53 per cent can’t afford a bill out of the blue and 13 per cent have run out of food and not been able to afford to replace it. Some 55 per cent have trouble paying their rent – compared to just 34 per cent of those with a mortgage. And things have got much worse as rents have risen. The percentage of renters who are struggling has risen from 42 in the spring to 55 per cent now.”

And Coles warns that according to her calculation, by the summer some 230,000 of those who are ‘at risk’ of falling into arrears will have cash savings that cover less than three months of essential spending – making them ‘high risk’. Plus an additional 470,000 will also have unsustainable spending, so they’re at ‘critical risk’. 

“It means that the cost-of-living crisis for those with a mortgage is likely to last even longer” she cautions.