It said there were now 2.7 million adults with characteristics of vulnerability such as poor health, low financial resilience or having experience of negative life events. Having just one of these means these consumers are at a greater risk of harm, the regulator said.

The findings in the Financial Lives survey have highlighted the importance of the so-called mortgage holiday – or payment deferral – scheme.

Indeed, the survey revealed the impact measures such as this had on consumers. It said one in six – which is 17% of mortgage holders or 3.2 million households – took a mortgage payment deferral.

Out of this number, 40% said they would have struggled without such measures.

Of particular concern was the fact there was an imbalance in those experiencing difficulties.

Nisha Arora, director of consumer and retail policy at the FCA said: “Many of the findings are worrying. Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown.

“The pain is not being shared equally with a higher than average proportion of younger and BAME adults becoming vulnerable since March. It is likely the picture will have got worse since we conducted the survey.”

It said the number of people with low financial resilience – meaning over-indebtedness or with low levels of savings or low or erratic earnings – has grown in 2020 from 10.7 million to 14.2 million.

The FCA revealed in three (30% or 15.9 million) adults said they expected their household income to fall during the next six months, while 25% (13.2 million) expected to struggle to make ends meet.

According to the report, meanwhile, 3.5 million people in the UK have outstanding mortgage debt of at least four times their annual household income.

However, 48% of adults have not been affected financially by Covid-19, and 14% have actually seen an improvement in their financial situation.

Karen Noye, mortgage expert at Quilter said the report made for ‘depressing reading’. She said it was positive however that two thirds of those who took a mortgage payment deferral felt their lender was sympathetic. This compared to 51% who felt the same when it came to credit payment deferrals.

She added: “The economic hardship stemming from the pandemic may have only just started and as the government support packages are gradually withdrawn, we may see many more people fall into financial trouble.”

Knowledge gap

Vikki Jefferies, proposition director at PRIMIS Mortgage Network, described the report as alarming.

“The financial security of a vast number of households up and down the country remains poor,” she said

“What now needs addressing is the knowledge gap among consumers of the financial solutions that are out there to help – and this is where advisers will come into their own.

“Many borrowers may be more likely to resort to unsecured forms of lending to alleviate the pressure on their finances, for example.”