We are providing selected statistics in this research note from our Financial Lives cost of living (Jan 2023) recontact survey, to give an insight into the financial situation UK adults experienced over the 6 months to January 2023.
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Later in the year we will be publishing our full Financial Lives 2022 survey report. It will include full results and more detailed analysis from the January 2023 recontact survey. See the annex below for more information on Financial Lives, including this recontact survey.
The help people need to deal with the rising cost of living goes beyond financial services. But the industry has a vital role to play in supporting people during these challenging times. We have set clear standards and expectations for how consumer credit, mortgage and insurance firms should help customers in financial difficulty, and we are taking assertive regulatory action where firms fail to meet them. These survey findings highlight the continued importance of ensuring consumers get appropriate support when facing financial difficulty and ideally seek such support at an early stage.
We encourage anyone struggling to keep up with payments to contact their lender or insurance provider for support. Consumers can also visit MoneyHelper for useful tips on living on a squeezed income and to find free, expert debt advice.
1. Summary findings
- The number of adults who missed payments on any domestic bills or meeting any of their credit commitments in 3 or more of the previous 6 months went up by 1.4 million: from 4.2 million (8%) in May 2022 to 5.6 million (11%) in January 2023.
- The number of people who felt that making these kinds of payments was a heavy burden jumped from 7.8 million (15%) to 10.9 million (21%).
- Our survey also showed that 29% of UK adults with a mortgage and 34% of renters experienced payment increases in the 6 months to January 2023.
- Of UK adults who were insurance or protection policyholders in May 2022, 8% cancelled one or more of their policies, and 7% reduced the level of cover on one or more their policies – in the 6 months to January 2023, specifically to save money due to the rising cost of living. As some policyholders did both (cancelled and reduced cover), this means that 13% of May 2022 policyholders (or 6.2m people) cancelled and/or reduced cover.
- The toll on mental wellbeing was considerable, we found that just over 1 in 2 UK adults, or 28.4 million people, were more anxious or stressed due to the rising cost of living.
- Some survey participants told us in their own words how the rising cost of living was affecting them. We have included some of these examples to demonstrate the impact on people’s lives.
- Some respondents shared positive stories of their dealings with firms that reflect the guidance we give, for example that consumers should contact their credit or mortgage lender if they are struggling with payments. We have included some of these positive stories to encourage consumers to seek support early, and to illustrate to firms the real-life, beneficial impact of proactive support and appropriate forbearance.
2. Changes in people’s financial situation
The survey investigated how people were managing to pay bills.
Asked about the burden of keeping up with domestic bills and credit commitments, 1 in 5 (21%) described it as a heavy burden (up from 15% in May 2022) and just over half (51%) as somewhat of a burden (up from 45% in May 2022). As Figure 1 shows, in total 72% of UK adults felt that keeping up with these bills was a burden.
The figure also shows that over three-quarters (77%) of UK adults in the 6 months to January 2023 felt that the burden of keeping up with their domestic bills and credit commitments had increased: 27% saying a lot more of a burden, and 50% saying a little more of a burden.
"I took out two credit cards to pay for my MOT, car repairs, and a kettle when broken. I also now pay for home insurance on credit card. And I purchase food on credit sometimes." (Female, 45-54)
"We rely on oil to heat our home, as we are not connected to mains gas where we live. We have a coal fire – the cost of oil has more than doubled since last year, with the price of coal up threefold. We rarely put the heating on, as the costs for oil are just crippling. All my savings have just been spent on filling my oil tank – over £1000." (Female, 35-44)
The group we describe as being in financial difficulty, on the objective measure of having missed paying domestic bills or meeting credit commitments in 3 or more of the previous 6 months, went up from 8% in May 2022 to 11% in January 2023, which is an increase of 1.4 million people.
Another survey insight, as Figure 1 also shows, is that 3 in 10 (29%) of the adults who had a mortgage in May 2022 had seen increased payments in the 6 months to January 2023. This equates to 8% of all adults, as not all adults had a mortgage. For renters, a third (34%) had seen their rent go up in the 6 months to January 2023. This equates to 10% of UK adults paying more rent. In total, therefore, 18% of UK adults had had mortgage or rent payment increases in the 6 months to January 2023.
We also see that 1 in 8 adults (13% or 6.2m) who were insurance or protection policyholders in May 2022 cancelled at least one of their policies (8% or 3.6m) and/or reduced the level of cover on at least one of their policies (7% or 3.1m) in the 6 months to January 2023, specifically to save money due to the rising cost of living.
The policies cancelled by the highest proportions of May 2022 policyholders were:
- extended warranty – cancelled by 5.0% of extended warranty policyholders
- separate home contents insurance – cancelled by 3.8% of separate home contents policyholders
- pet insurance – cancelled by 3.8% of pet insurance policyholders
- gadget insurance – cancelled by 3.1% of gadget insurance policyholders
- mobile phone insurance – cancelled by 2.5% of mobile phone policyholders
No more than 1.5% of May 2022 policyholders cancelled any other type of policy.
3. The impact on mental wellbeing
As a result of the rising cost of living, over half (54%) of UK adults felt more anxious or stressed. Figure 2 highlights some other worrying statistics related to the increasing cost of living. This includes just over 1 in 10 (11%) UK adults having put off dealing with financial matters (for example, by ignoring warning letters or not opening correspondence) and/or having avoided speaking to their lenders about their finances or debts.
"I suffer from health problems and my body temperature on most days is close to hypothermic at 35 degrees. I can't afford to turn the heating up. This has made me feel more lonely than ever before, and I can't afford to go visiting family." (Female, 35-44)
We have reminded firms that if a customer is in vulnerable circumstances, they should provide them with an appropriate level of care and support.
4. Stories about good consumer support outcomes
We heard positive stories from some consumers about their experience dealing with financial services providers and how they are managing debts and costs better as a result. These stories are illustrative only, and we highlight them to encourage other consumers to seek support and to demonstrate to firms the benefits of proactive support and appropriate forbearance.
Some consumers told us they were pleased with how they were treated when they contacted their lender. Some arranged new payment plans to enable them to pay a reduced amount for a longer period, while some were referred to not-for-profit debt advisers.
Some consumers noticed that providers were proactively reducing costs or helping consumers to do so. Some consumers were familiar with the concept of ‘cost-of-living support’, such as an interest-free overdraft.
We heard stories from some consumers of significant savings made when they contacted their provider to cancel or reduce the level of cover on policies. We also heard of providers waiving the cancellation charge.
5. Annex: More information about Financial Lives
Financial Lives, our flagship survey of adults aged 18 and over across the UK, provides a wealth of information about consumers – including their experiences with financial services providers, their financial situation and resilience and the financial products they hold.
Our latest main survey – Financial Lives 2022 – was completed in May 2022 with 19,145 responses. In October 2022 we published selected results from this main survey on vulnerability and financial resilience to give an insight into the financial positions of UK consumers in May last year.
From 6 December 2022 to 16 January 2023, we ran a short survey among respondents to our main Financial Lives 2022 survey. We gained 5,286 responses. We weighted these responses to provide nationally representative results. As the majority (68%) of these responses were completed in January 2023, we refer to this survey as our ‘Financial Lives cost of living (Jan 2023) recontact survey.’
This recontact survey was designed to understand the significant financial impact of the rising cost of living on adults across the UK over the 6 months to January 2023. It provides insights for the FCA and for lenders, insurance companies and other interested parties about the numbers of consumers struggling to pay their bills and/or seeing their debts increase. The survey explored the ways in which consumers dealt with the rising cost of living.
We also asked some open questions around what the rising cost of living means to consumers and about their recent experiences in dealing with financial services firms. This is to gather illustrative feedback on their experiences in their own words.
We will publish the full Financial Lives 2022 survey report later this year. It will include full results and more detailed analysis from this Financial Lives cost of living (Jan 2023) recontact survey.