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Financial Lives Survey

Every few years the FCA selects households to invite and get an image of their overall finances and how they are coping. You can see the full report here.

Highlights

The report is far-reaching as you would expect and it will come as no surprise that more households than ever before are struggling. Some of the key highlights from the report include;

• 7.8m finding it hard to keep up with bills, up 5.3m.
• 1 in 4 or 12.9m have low financial resilience, up 2m.
• 4.2m have missed domestic or credit card bills in at least 3 of the last 6 months. Up 3.8m.
• Those in the most deprived UK areas are 7 times more likely to struggle financially than the least deprived.

None of this seems surprising. Those who were already struggling to make ends meet are now facing a 40-year high in inflation and salaries are failing to keep pace with runaway inflation.

That 1 in 4 UK adults are now in financial difficulty to some extent and would be in significant difficulty should they suffer a financial shock of any type is sobering.

Even those that managed to save a little during COVID due to the restrictions have found what little they had now gone again due to the cost of living increases.

Mortgage Rates

When the Monetary Policy Committee meets on the 3rd of November 2022 it seems almost certain that a 0.5% increase and possibly a 0.75% increase is likely. Adding more fuel to the fire.

There is a significant number of borrowers currently on fixed rates of < 2% who will be looking for a new deal within the next 6-12 months. Based on where the market is today they will be facing rates 3 times that which is surely going to cause arrears and ultimately lead to higher repossessions.

Summary

Things aren't great, nobody needs to be told that but it appears to be the only message everyone is giving at the moment. There is no current light at the end of the tunnel.

Even if inflation dips back down swiftly it stops the rot as it were but does not solve the issue for many unless salaries increase to cover the increase in the cost of living seen already. If they don't increase then it will take many years for the most vulnerable to recover.

The government will announce a new Prime Minister next week, who almost certainly appears to be Rishi Sunak. What is he going to do in order to calm markets, and control inflation, and interest rates? Time will tell.