Consumer confidence and financial wellbeing in February 2021
Consumer confidence in the future of the economy increased this month, reaching pre-pandemic levels for the first time since February of last year.
The proportion having missed or defaulted on a payment decreased this month, whilst other measures of financial difficulty stayed at similar levels.
Most consumers who have experienced missed payments or used a payment holiday have been satisfied with the support given by their provider.
Consumer confidence increases significantly this month
Consumer confidence has been boosted this month, with confidence in the future of the economy and future household situation both increasing to pre-pandemic levels. Both measures are now at a level similar to that last seen a year ago in February 2020, before the pandemic caused confidence to plummet.
Confidence in the current state of the economy remains very low, but the increase in forward-looking confidence suggests that more consumers can now see light at the end of the tunnel as the vaccinations programme continues apace. That being said, confidence in the future of the economy has increased before following reduced cases over the summer and vaccine approvals in the autumn, only to drop again the following month, therefore it remains to be seen whether this is a more durable recovery in consumer confidence.
Increased consumer confidence could mean good news for the economic recovery if consumers feel confident to spend when lockdown restrictions end. Previous research by Which? showed that many consumers have been able to save more money during the pandemic, but whether or not consumers spend these additional savings will depend on their confidence to do so.
Missed or defaulted payment rates decreased this month
There is also better news this month regarding the financial wellbeing of households. 40% of households reported making at least one adjustment, such as cutting back on essential spending, using an overdraft, or borrowing from friends and family to cover essential spending in the past month, which is consistent with previous months. More strikingly, the proportion of households who had missed or defaulted on a housing, bill or credit payment actually fell in February.
Last month we reported that the number of households who had missed or defaulted on a payment had crept up for two months running, to a high of 7.9% in January. However, this rate decreased significantly to 4.8% in February, although this does vary across different types of payment. For example, very few mortgage holders reported having missed or defaulted on a payment (1%), but 6% of renters had.
It’s possible that the increase in December and January could have been caused by increased household expenses during the Christmas period. Issues with problem debt are known to be more common after Christmas and increased financial pressures resulting from the pandemic might have exacerbated this.
Although the overall missed or defaulted payment rate has decreased this month, the decline is smaller among some groups of consumers. The rate fell by only around 15% among people who have been furloughed or lost hours because of the crisis, whilst it dropped by nearly half (46%) for those working as usual. Similarly, the missed payment rate for low income households (under £21,000) dropped by around 14%, whilst it has dropped by just over half (52%) for the rest of the sample. The continued high rates among these groups could yet point to difficulties ahead if, as forecast, the unemployment rate increases in the coming months.
The proportion of households currently on a payment holiday or plan for a bill, housing, credit card or loan payment was almost identical to last month at 5.8%.
Of the 101 respondents to our survey who had defaulted or missed a payment, the majority (56%) said they had contacted their provider for support. From open-ended responses on their experience of having contacted their provider, we can see that a large majority were satisfied with the help given to them. Many reported having arranged a payment plan with their provider. However, a small number of people were dissatisfied with the response from their provider, with examples of consumers getting little help or being unable to get through to their provider.
“They were very supportive and understanding of my situation and said they would help me figure out a payment plan”.
“I did not receive much support and was disappointed with the attitude of the provider as I was under the impression that help was available. It is very difficult to survive currently and feel more could be being done for myself and many many others”.
The fieldwork was conducted by Populus on behalf of Which between 10th and 12th February 2021. A nationally representative sample of 2,103 consumers was surveyed.
If you have any questions or would like to find out more, please email Sophie Beesley at firstname.lastname@example.org