Around 2.3 million UK households missed payments in January as the lived inflation gap between income groups hit record levels, new Which? research suggests, as the consumer champion calls on essential businesses to do more to support people through the cost of living crisis.
According to the latest findings from Which?’s Consumer Insight Tracker, an estimated 2.3 million households missed or defaulted on at least one mortgage, rent, loan, credit card or bill in January 2023.
This marks an increase on December 2022, when 1.9 million households were estimated to have defaulted on or missed a payment. Missed payments typically peak in January, and this year’s missed payment rate is similar to the past two years.
A 46-year-old man from Northern Ireland said: “I find it hard to sleep. I am eating less due to money and worry. My mortgage has risen significantly. I am finding it hard to find money for energy bills. As I live in a rural area I can no longer afford to try to socialise with friends and family due the cost of fuel. I am feeling more isolated than ever.”
Six in ten (59%) made at least one financial adjustment – such as cutting back on essentials, selling items or dipping into savings – in the last month to cover essential spending. This equates to an estimated 16.5 million households.
This is a significant increase on the four in 10 (49%) seen this time last year, but lower than the peak of two-thirds (65%) making adjustments in September 2022. The increase in the proportion making adjustments to cover essential spending is largely driven by more households cutting back on essentials – such as utility bills, housing costs, groceries, school supplies and medicines.
The number of households cutting back on essentials has increased by 11 percentage points from three in 10 (27%) last January to four in 10 (38%) this January.
Which? also analysed Office of National Statistics data and found that different household types and income groups experienced different levels of inflation in 2022.
In 2022, the households on the lowest incomes experienced much steeper increases in inflation – peaking at an estimated 11.5 per cent in October 2022. This was nearly 3 per cent higher than the estimated inflation rate for the highest income group (8.6%). This is the largest inflation gap Which? has estimated between income groups since its lived inflation estimates began in 2016.
Single parent and retired households have experienced a particularly high lived inflation rate compared to other family types because they spend a greater proportion of their budget on food, energy and fuel, which have all seen large price hikes during the cost of living crisis.
This continued pressure on household finances and the need to cut back on everyday essentials is causing severe stress and worry for many people. A 31-year-old woman from the South West said: “I constantly stress and worry about not having enough money to provide for my family. This is having a significant impact on my mental health.”
With the UK heading into recession, mortgages and rent costs rising and the energy price guarantee becoming less generous from April, consumers will only face further financial pressures in 2023.
Which? recently launched a campaign calling on essential businesses – energy firms, broadband providers and supermarkets – to do more to help consumers struggling to make ends meet. For example, telecoms firms must allow consumers to leave without penalty if their prices are hiked mid-contract – regardless of whether these increases can be said to be transparent.
Rocio Concha, Which? Director of Policy and Advocacy, said:
“With 2.3 million UK households missing payments in January and those on the lowest incomes being hit hardest, consumers will need more support than ever in 2023.
“As the cost of living crisis continues to bite into household finances, we are calling on businesses in essential sectors – like food, energy and broadband providers – to do more to help customers get a good deal and avoid unnecessary or unfair costs and charges.”
Notes to editors
Which? cost of living campaign
The consumer champion is launching a campaign calling on businesses in essential sectors – supermarkets, telecoms and energy – to do more to help their customers through the cost of living crisis. More information on the campaign is available here.
Consumer Insight Tracker
The Consumer Insight Tracker is an online poll conducted monthly by Yonder on behalf of Which?. It is weighted to be nationally representative with approximately 2,000 respondents per wave.
The survey indicates that between 57 per cent and 61 per cent of households made an adjustment to cover essential spending in the last month, with an average estimate of 59 per cent.
Based on the survey and the ONS estimate for the number of households in 2020 of 28.1m, Which? estimates that between 15.9 million and 17.1 million households made an adjustment to cover essential spending in the last month, with an average estimate of 16.5 million.
The survey indicates that between 7 per cent and 9.4 per cent of households missed or defaulted on at least one mortgage, rent, bill or credit payment in the last month, with an average estimate of 8.2 per cent.
Based on the survey and the ONS estimate for the number of households in 2020 of 28.1 million, Which? estimates that between 2 million and 2.6 million households missed a payment in the last month, with an average estimate of 2.3 million. This compares to between 1.6 million and 2.2 million households in December 2022, with an average estimate of 1.9 million.
‘Lived inflation’ calculations are based on Which? analysis of ONS data on inflation and household spending. Estimated inflation rates are 9.4 per cent and 11 per cent for single parent and retired households, respectively. Please note that inflation rates are based on the Consumer Prices Index including owner occupiers’ costs (CPIH) as opposed to the CPI and refer to the 12 months up to December 2022. Further details on the methodology can be found here.
Figure 1: 8.2% of households had missed a payment in the last month in January 2023
Source: Which? Consumer Insight Tracker, Online Poll weighted to be nationally representative, approx 2,000 respondents per wave. The chart shows the proportion of households who have missed a housing, bill, loan or credit card payment in the last month.
Figure 2: Six in ten households made at least one adjustment to cover essential spending in the last month
Source: Which? Consumer Insight Tracker, Online Poll weighted to be nationally representative, approx 2,000 respondents per wave. Adjustments include: cutting back, dipping into savings, borrowing from friends and family, taking out credit cards or loans, selling items, using an overdraft.
Figure 3: The increase in financial adjustments is largely driven by a rise in the proportion of household cutting back on essentials
Source: Which? Consumer Insight Tracker, Online Poll weighted to be nationally representative, approx 2,000 respondents per wave.
Figure 4: Estimated inflation rate by household income
Figure 5: Estimated inflation rate by household type
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