Savings are being dipped into and debt is rising as incomes fall.
Debt levels are on the increase as people spend more this month.
Families are taking on more debt and spending their savings to meet their expenses in the run up to Christmas, according to Markit Research.
The Household Finance Index found that almost 30% of participants said that their finances worsened this month – only 7% said that their monetary positions had improved.
The research highlighted that spending increased despite a drop in incomes and a rise in job security worries. However, this came at the expense of a rise in debt and a fall in savings.
Tim Moore, Economist at Markit, said: “The North West posted the fastest rise in household debt, followed by Wales and Scotland. Higher levels of debt were accompanied by the sharpest rise in demand for unsecured credit since July, with the fastest growth seen in the North East and East Midlands. All income groups reported an increase in demand for unsecured credit in November”.
He added that the rise in food and clothing prices are squeezing disposable income resulting in more debt as people spend more. However, despite the rise in spending, consumers are choosing not to make major purchases and are taking a more cautious attitude towards big-buy items.
Mr Moore said: “As Christmas approaches, retailers will cast a nervous eye towards the ongoing weakness in household finances. Attitudes towards making major purchases deteriorated substantially in November. This tends to be an accurate advance indicator of wider spending trends, so points to subdued consumer demand in the coming months. This weakness is all the more worrying as it is reasonable to have expected spending on big ticket items to have picked up ahead of January’ s VAT rise”.