Financial Lives January 2023: rising cost of living

• Context
• The study
• Key findings
• Points to consider

Context

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. The Financial Conduct Authority (FCA) sets standards and expectations for how consumer credit, mortgage and insurance firms should help customers in financial difficulty, and takes regulatory action where firms fail to meet them. The FCA publishes a report called Financial Lives. Before the 2022 report was publishes, the FCA brought out this interim report based on an additional survey that recontacted participants in the main survey to ask questions on the impact of the increases in the cost of living, in order to highlight the continued importance of ensuring consumers get appropriate support when facing financial difficulty.

The study

Financial Lives is the FCA flagship survey of adults aged 18 and over across the UK and 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. The latest main survey – Financial Lives 2022 – was completed in May 2022 with 19,145 responses. This report is based not on that data but on an additional short survey completed by 5,286 respondents to the main Financial Lives 2022 survey who were recontacted from 6 December 2022 to 16 January 2023.

These responses were weighted to provide nationally representative results. As the majority (68%) of these responses were completed in January 2023, this survey is known as the ‘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.

The survey also included 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.

Key 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%).
• The 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.
• The toll on mental wellbeing was considerable; 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 respondents shared positive stories of their dealings with firms that reflect FCA guidance, for example that consumers should contact their credit or mortgage lender if they are struggling with payments.

Points to consider

• Methodological strengths/weaknesses: This is a limited report and full analysis will be published at a later stage together with the full Financial Lives 2022 report.
• Applicability: Of interest to financial institutions and service providers, government, policy makers, support agencies and anyone working with people who may be struggling to make ends meet.
• Relevance: Highly relevant given the ongoing high costs of living.
• Generalisability: The research is specific to adults in the UK, but the themes are likely to be similar in other markets.