3 in 4 households have avoided turning on the heating

At some point in 2022, 74% of households have avoided turning on the heating despite wanting to. In addition, 55% have turned down the temperature in their home, 50% have reduced use of their oven and 31% are only heating part of their homes. The latest Financial Fairness Tracker shows:

• Nearly 80% (77%) increase in people with no confidence in their financial futures
• 6 in 10 (61%) feel anxious when thinking about their finances
• A third report rising costs have negatively impacted their ability to participate in social and family gatherings

This time last year, 5.6m UK households told researchers they lacked confidence in their financial outlook over the next three months. New research released today [14 December] finds that figure has now increased to 10m households (a 77% increase, meaning 35% of all households). In addition, nearly 11 million agree to some extent that they feel like they have no control over their financial situation (with over 4 million strongly agreeing that they have no control).

The Financial Fairness Tracker, commissioned by the abrdn Financial Fairness Trust and analysed by a team at the University of Bristol, has been monitoring the personal finances of households since the start of the pandemic (sample around 6,000 people).

The latest Tracker data shows that concerns about finances are already taking a significant toll on people’s physical and mental wellbeing. Over 12 million households in the UK report a worsening in their ability to keep their home warm and comfortable this year, while nearly 10 million households have eaten lower quality food and 5 million have eaten fewer meals. More than 17 million, six in ten of all UK households, report that thinking about their finances makes them anxious (with over 7 million strongly agreeing with this statement).

Coping strategies

As the cost of living crisis bites, researchers found the biggest decrease in spending was on holidays or breaks away in the UK or abroad (now at 45% of all households cutting back, an increase of 7 percentage points since June) and keeping their homes warm and comfortable (now at 44% an increase of 10 percentage points). A smaller proportion are cutting back on hobbies (31%, an increase of 5 percentage points) and physical exercise (13% an increase of 2 percentage points). In addition, as we approach the festive season, almost a third of households have said that rising costs have negatively impacted their ability to participate in social and family gatherings.

Researchers asked what actions people had taken in the last four weeks to make ends meet:

• 53% had reduced use of the cooker/oven
• 44% saved less money than they normally would
• 23% used money from savings for daily living expenses     
• 17% used a credit card, overdraft or borrowed money from other formal lenders for daily living expenses
• 7% sold or pawned possessions that they would have preferred to keep
• 6% cancelled or did not renew an insurance policy to save money

Housing costs

Rising interest rates mean a high proportion of mortgaged households are worried about their financial situation in the next 12 months – especially those currently on variable rate or tracker mortgages (75% are ‘very’ or ‘quite’ worried, compared with 63% of all households) and those whose fixed rate is ending in the next year (78% worried).

It is estimated there are 1.1 million mortgaged households who are both currently in serious difficulty and who are worried about the next 12 months. The equivalent figures for privately renting households and social renters are 1.3 million and 1.4 million respectively. The Government introduced a 7% cap on rent increases in the social housing sector in the Autumn Statement – lower than the 11.1% rent increase that would otherwise have taken place next year. This will go some way to soften the blow for those in the social housing sector. However, researchers estimate there are 600,000 private renters in difficulty who are locked out of cost of living payments because they don't currently receive benefits. These households may see their rents rise when landlords’ mortgage payments increase.  Private renters receiving benefits to help with housing costs are also left exposed, as Local Housing Allowance has been frozen, limiting their ability to meet rent rises.  

Support

The Tracker looked at how well UK households felt supported. In general they feel less supported in 2022 than they did during the pandemic (49% felt well supported during the pandemic compared to 41% now). People felt particularly unsupported by employers (where the government’s furlough scheme significantly offset the economic impact of the pandemic on the labour market) and lenders (where lenders offered payment deferrals and tailored support to borrowers during the pandemic).

Mubin Haq, CEO of abrdn Financial Fairness Trust, said:

“Winter is here and as temperatures go below freezing, families are having to make painful choices as to whether to heat their homes. It is deeply worrying that many have little confidence in their financial futures. They can see increasing mortgages, rents and energy bills coming over the hill and this is causing anxiety and stress.  Many were already cutting back on essentials and this has intensified over recent months. Efforts by the government and others to support people through the cost of living crisis are welcome but fall short of the support that is needed, and that was provided during the pandemic. It’s vital government provides additional targeted support to those least able to weather the coming storm.”  

Professor Sharon Collard, Chair in Personal Finance at the University of Bristol, said:

“The number of households feeling they have no control over their household budgets is worrying. It raises real questions for policy-makers – and society more generally – about how best to mitigate the effects of financial difficulty in the coming months. If there is too little support for households’ immediate finances, there will almost certainly be costs of inaction which hit other parts of society – for example, increased pressure on the NHS due to conditions caused by cold homes, worsening diets or worsening mental health. The support measures announced in the November Autumn statement are not insignificant and will indeed make a real difference to many households – but, while the wider economy continues to struggle, millions of households across the country will be forced to contend with the daily reality of budgets that just won’t stretch far enough.”

Read the report