Around one in five adults were finding bills and credit commitments a heavy burden by the start of this year, according to the City regulator.
The number of adults struggling this way is estimated to have increased by 3.1 million since May 2022, the Financial Conduct Authority (FCA) said, jumping from around 7.8 million (15%) in May last year to 10.9 million (21%) in January 2023.
The number of UK adults who had missed bills or loan payments in at least three of the previous six months is also estimated by the regulator to have increased by 1.4 million, from 4.2 million (8%) in May 2022 to 5.6 million (11%) in January 2023.
The regulator released the latest figures after gathering more than 5,000 responses as part of its UK-wide survey of people aged 18 and over.
Researchers also found that 29% of adults with a mortgage and 34% of renters had experienced payment increases in the six months to January this year.
There were also signs of some people reducing their insurance cover as a way to ease general living costs pressures – which could leave them worse off or in difficulty if something goes wrong.
Among people who had insurance and protection policies last spring, 8% had cancelled one or more policies and 7% had reduced their level of cover, specifically to save money due to rising living costs, in the six months to January this year.
Some did both – meaning that around 6.2 million adults (13%) who had policies in May 2022 had cancelled or reduced their cover by January 2023.
The FCA is reminding borrowers that they can get help from their lenders if they are struggling to keep up with payments.
The regulator said it has repeatedly reminded firms of the importance of supporting their customers and working with them to solve problems with payment, including by writing to industry bosses to make sure they are aware of the regulator’s expectations.
Where firms have not supported their customers properly, the FCA has told them to make changes.
It has reminded 3,500 lenders of how they should be supporting borrowers in financial difficulty and told 32 lenders to make changes to the way they treat customers.
Our Head of Competition Policy, Ed Smith talks about what the Consumer Duty price and value outcome means for both firms and consumers in this Inside FCA #podcast episode. #CostOfLiving #ConsumerDutyhttps://t.co/JBs3TP9TD6 pic.twitter.com/AUkDVeCKlj
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As part of its Financial Lives survey, the FCA also found that the cost of living is having an impact on people’s mental wellbeing.
Around 28.4 million people in January 2023 felt more anxious or stressed due to the rising cost of living than six months earlier, the regulator said.
Some 28% had lost sleep due to money worries.
One woman told the survey she had used credit to pay for car repairs, home insurance and food shopping.
Another said she had used all her savings to fill her oil tank and she relied on oil to heat her home.
Another woman said she had taken her son off her motor insurance.
A man told the survey he had cancelled his insurance and social outings to make ends meet and was also eating less.
And a woman said she had been seeing less of her family because of the cost of driving long distances to see them. She had also stopped playing sport and participating in clubs.
Just over one in 10 (11%) adults surveyed said they had put off dealing with financial matters, such as leaving correspondence unopened or ignoring warning letters.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our research highlights the real impact the rising cost of living is having on people’s ability to keep up with their bills, although we are pleased to see that people have been accessing help and advice.
“If you’re concerned about your finances, you do not need to worry alone. We’ve told lenders that they should provide support tailored to your needs.
“And, if you find yourself in debt or want to know more about how to manage your finances, free expert advice is available.
“We will continue to act quickly to make sure financial firms help their customers who are facing financial difficulty or are worried they might be soon.”
The FCA will be introducing a new consumer duty in the summer. The duty will require firms to act to deliver good outcomes for consumers and make sure that they are properly supported while using a financial product or service.
The full Financial Lives 2022 survey will be published later in 2023.
People can visit the Government-backed MoneyHelper service for money tips.
A UK Finance spokesperson said: “The banking and finance industry is fully committed to supporting customers who are struggling with repayments and today’s report from the FCA highlights that there is a range of tailored support available.
“Lenders are proactively contacting customers and will always work with them to find the right solution for their particular needs and circumstances.
“Anyone who is worried about their financial situation should contact their lender as soon as possible to discuss the options available. Discussing your options with your lender will not affect your credit rating.”
The findings were released as a separate YouGov survey, commissioned by HSBC UK, found that nearly eight in 10 (78%) people are proactively looking for ways to reduce their outgoings.
Only 3% of people in that survey were aware that they can contact their bank or building society to discuss their financial worries without it impacting their credit score.
Nearly half (49%) of people surveyed for HSBC UK had cut back on non-essential spending and almost two-fifths (38%) are sticking to more rigorous budgets.
Some 45% said they are looking to reduce their grocery bill by shopping at a cheaper supermarket, the survey of more than 2,100 people in April found.
HSBC UK said, according to its own data, customers have been cancelling over 200,000 subscriptions per month typically on its mobile banking app.
HSBC UK’s head of wealth and personal banking Jose Carvalho said: “The increased cost of living is taking its toll on many people, but our research shows people are doing the right thing by taking action to get a grip on some of their discretionary spending.
“We’re here to help. It’s important that customers understand that they can talk to us about their money worries without judgment and without it affecting their credit rating.
“We are providing free financial health checks and webinars to offer personalised guidance to customers and non-customers alike, including the opportunity to book a call with a financial wellbeing consultant for additional one-to-one support.”