For the first time in 30 years, UK households have seen their outgoings surpass their income. The data, from the Office for National Statistics (ONS), showed that the average household spent £900 more than they received in income during 2017 – equating to some £25bn.

The last time outgoings were higher than income was 1988. The money must come from somewhere, and this means the households are either borrowing more or dipping into savings.

People made just £37bn in deposits with UK banks, compared to taking out nearly £80bn in loans. In 2017 there was only a £2bn divergence in favour of loans versus deposits.

Overall, individuals accumulated more debt than assets (such as deposits, bonds, shares and pensions) since records began in 2017 – a direction of travel that could see them struggle to cover debts in the future. Rising prices have seen the gap between gross disposable income close to just tens of pounds.

“The dual impact of inflation and low interest rates means consumers will continue to see next to nothing on their hard-earned money and disposable incomes will continue to feel stretched”

The low interest rate is having an impact on behaviour – the base rate was 15% in 1990, compared to 0.5% now.

“Put this all together and you see the significant challenge policymakers have in boosting financially resilience in the UK,” said AJ Bell senior analyst Tom Selby.

“For those lucky enough to have some spare cash at the end of the month, investing in stocks and shares through pensions and ISAs has proven an attractive alternative as markets have soared in recent years.

“However, for people having to borrow to make ends meet, saving for the future might feel like a luxury they simply cannot afford.”

Giles Cross, CEO of peer-to-peer lender FOLK2FOLK, said the “squeeze” on households was not over.

“The dual impact of inflation and low interest rates means consumers will continue to see next to nothing on their hard-earned money and disposable incomes will continue to feel stretched,” he said.

But for any change to make a real difference, interest rates would need to increase “significantly”.

Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance

Further reading on this topic:

Over-indebted households fuelling pensions crisis