LONDON, July 13, 2011 /PRNewswire/ --
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 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 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."
SOURCE Credit Confidential