The number of people missing loan and credit repayments has seen a significant jump this year, according to the Financial Conduct Authority which has told firms to work with customers to solve payment problems.
According to the latest research from the regulator, the number of people struggling to meet bills and credit repayments has risen by 3.1mn since May 2022 to 10.9mn.
The research also highlighted the impact the rising cost of living is having on people’s mental wellbeing.
At the beginning of this year, around half of UK adults (28.4mn people) were reportedly more stressed or anxious than they were six months earlier as a result of financial pressures.
The FCA’s executive director of consumers and competition, Sheldon Mills said if people are worried about their finances “they 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,” Mills said.
He added: “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.”
According to the FCA, the number of adults who missed bills or loan payments in at least three of the last six months has also gone up by 1.4mn to 5.6mn.
Back in June last year, the FCA wrote to more than 3,500 lenders to remind them of the standards they should meet as consumers face the rising cost of living.
“We need to engage and work effectively as an industry to understand the changing pressures on consumers – now and in the uncertain months ahead,” it said at the time.
Since then, prices have risen further with the inflation rate currently sitting at 10.1 per cent.
Myron Jobson, senior personal finance analyst at Interactive Investor said for anyone that is struggling, it is worth consulting with a debt advice charity like StepChange or Turn2Us.
“Many of those who were fortunate enough to become accidental savers during the pandemic have seen their bumper savings depleted in the face of red-hot inflation.
“It isn’t easy to stay out of the red for many Britons in the prevailing economic conditions, with the cost of borrowing on the up and inflation running rampant,” Jobson said.
“Mortgage repayment obligations, which is the largest source of debt for many households, has gone through the roof thanks to successive hikes to interest rates, so too have rents, while increases to energy and food bills have been difficult to digest at a time when inflation has taken a big bite out of our purchasing power,” he added.
Mortgages
Likewise, Quilter’s mortgage expert Karen Noye said the findings from the FCA come as no surprise with mortgage bills and the costs of other forms of debt now much higher than what people have been used to.
“While the pandemic no doubt caused many financial shocks, particularly for the self-employed, the cost of living crisis arguably has played a much greater role in damaging people’s financial wellbeing,” she said.
“If you are in a situation where you are struggling with your mortgage bills or other debt it doesn't need to spell disaster. We are hopefully nearing the peak of interest rates but with energy bills still eye-wateringly high and stickier than hoped inflation we are still far from out the woods,” Noye added.
Noye said anyone who is struggling should remember that firms are obligated to help their customers and as such they should not bury their head in the sand.
“Don't wait until the situation becomes unbearable, reach out to your lenders as soon as possible,” Noye said.
She added that consumers should work out what they can afford to pay back before reaching out to their lender and then discuss ways of making payments.
“Remember, you're not alone, and there are ways to manage your finances during these challenging times,” Noye said.
jane.matthews@ft.com
