Financial wellbeing in February 2022
There is further evidence of the impact of price rises as more than half (52%) of households made adjustments such as cutting back to be able to cover their essential spending in the past month. This compares with 42% just two months ago, and 40% in February 2021.
7% of households missed at least one payment in the past month, significantly higher than the 4.8% observed in February of last year.
9 in 10 consumers are worried about energy prices following the recent price cap announcement.
The cost of living crisis continues to put pressure on household finances
The Which? Consumer Insight Tracker shows that rising prices are having an increasingly widespread impact on household budgets. 52% of households report having made an adjustment to cover essential spending, such as cutting back on essentials, dipping into savings, or borrowing. This proportion has been steadily increasing over the past year and is 12 percentage points higher than in February of last year.
The specific adjustment that drove this increase is having cut back spending on essential household items. A third of consumers (32%) reported cutting back this month, compared to 27% in January and 19% in December. A quarter (24%) had dipped into savings, 11% had used an overdraft facility and 9% had borrowed from friends and family.
The proportion of households who missed at least one housing, bill, credit card or loan payment in the previous month was 7.0% in February. Though this is a drop from last month’s 9.1%, a high missed payment rate is typical in January, and the 7.0% this month is significantly higher than the 4.8% observed last February.
As reported in previous waves, financial difficulty is higher among those on lower incomes and those receiving social security payments. Of the 215 universal credit recipients in the survey sample, a quarter (25%) reported having missed a payment in the last month and 74% had made at least one adjustment to cover essential spending.
Missed payment rates also vary significantly between age groups, and are mostly concentrated among those of working age. The rate is especially high (13%) among those aged 25-34 in our sample and among 35-44 year olds (11%). However, it was just 1% among the respondents of age 65 and over, who make up nearly a quarter of the survey sample.
Increasing numbers of consumers are noticing price hikes
Rising levels of financial difficulty are undoubtedly related to increasing prices. The most commonly experienced price rises are for food. Seven in ten consumers (69%) reported having been recently affected by increased food prices, a significant increase on the 58% last month. Those in the 55-64 age group were most likely to report having been affected by increased food prices (81%).
Fewer people (59%) have been affected by energy price increases so far, but with the announcement of the 54% increase in the price cap from April, concern about energy prices is almost universal. 91% of people are now worried about energy prices, although nearly as many were worried about food (80%) and fuel (82%) prices.
The data from our survey this month illustrates the dilemma facing the government about the degree to which financial assistance should be targeted. More than half of households are feeling the pinch already and most people are worried about further price raises. This supports the UK government’s decision to spread help widely though the £150 council tax rebate.
However, the data also shows that certain groups, such as low-income workers, are being affected more acutely than some others, and the government has faced criticism for not making support more targeted.
Currently there are low levels of public satisfaction with the government’s actions to support people with higher energy prices. Overall, 67% of people told us they were very or fairly dissatisfied with the government’s support, but responses varied according to how much people are already experiencing the cost of living squeeze. Half (50%) of those who had made an adjustment to cover essential spending were very dissatisfied, compared with 37% of those who had not made an adjustment.
The fieldwork was conducted by Yonder on behalf of Which between 11th and 13th February 2022. A sample of 2,088 consumers was surveyed online and weighted to be nationally representative.
If you have any questions or would like to find out more, please email Sophie Beesley at email@example.com
Published on 22.02.22