I'm going to go ahead and give the classic historian non-answer and say "well it depends." Daily life in a place like Detroit or Mackinac Island would have been quite a bit different than in Buffalo or Black Rock, and those places would be different than in the dozens of scattered little border towns that didn't see any major events. Ultimately though, the impact on daily life wasn't so much a severance of international relationships as it was proximity to the fighting, or to marshalling armies, or to new infrastructural hubs to support the war.

We have to sort of waffle, because even the historical record presents a complicated picture. The war was undeniably unpopular, with a strong opposition in both the house and senate - 79-49 in favor in congress and 19-13 in the senate - and in state governments. Caleb Strong opposed the embodiment of the state militia under federal control by sending a letter stating "That [the state council is] unable, from a view of the constitution of the United States... to perceive any exigency exists, which can render it advisable to comply with the requisition." In other words, a war of aggression was not sufficient cause to embody the militia under federal command.

Amongst common people there was also resistance. Not merely in resistance to militia musters - though that was a persistent problem for US forces all throughout the conflict - but also in its potential harm to business interests. Peter Walton, an Albany businessman, wrote to a Canadian colleague saying that the war “will be very unpopular indeed… it will operate very much against us all.” However, militia detachments shows up on the New York frontier forts in such numbers that Augustus Porter had to caution that the problem was not recruitment but lack of supplies, “I think the danger now is that we shall have too great a number. Both of these were happening at once, a patriotic enthusiasm and clamor for action taking place right alongside mutinies, refusals of service and refusals to cross the border, and other acts of collective indiscipline.

Some of these acts riled up the local communities. Soldiers tore down rail fences to build crude shelters - a result of the American war department utterly failing to supply the men with proper clothing (especially in winter) and tents - and regularly pilfered petty items like food, clothing, and alcohol. It became such a problem in some areas that the locals organized themselves into ad hoc night watches, and in one incident in Buffalo, shot four soldiers in the act of stealing. This kind of behavior was exactly the reason that whig political theory had a strongly entrenched mistrust of standing armies; as "uninterested" men serving only for pay, they had no attachment to local communities and made free in violating them, and this mistrust was a large part of the early political resistance to the war.

Ultimately, apart from some events which I'll relate below, the war was conducted as most wars between European powers were: within an international culture of "enlightened" war, with both sides attempting to destroy the other's armies and materiel, and to stress the governments enough to force a capitulation on terms. This was not Clausewitz's "total war," it was more like a duel between nations, fought over specific grievances. Among the many conventions of this culture was the notion that civilians ought not be harmed, and even their property was protected. Where an army might destroy the public stores and buildings in a captured city, private property was exempt from destruction or capture.

In that sense, the civilians of Michigan were mostly left alone; after the capture of Mackinac Island, the civilians were given the option of swearing an oath of allegiance to King George or being forced to leave the island. Most opted to swear allegiance (apart from a single man, Ambrose Davenport, who publicly announced that "I was born an American, and at all hazards I will live and die as one!" - there is a restaurant called The Yankee Rebel on Mackinac Island today named in honor of him), and with the British alliance with the regional Natives, life in the fur trade post more or less got on as it always had.

The Niagara region probably had the worst of the war, on both sides. The Niagara river is fast but not terribly wide, and guards on either side were so close that they could occasionally fire at one another, or even respond to the other side's officers. When one sentry called for a status report from his men, he heard "all's well, too!" coming from across the river. This proximity meant that both sides had a fairly steady trickle of deserters coming from the other side, who gave intelligence on troop disposition and the general feeling of the public on either side.

Raids for prisoners, intelligence, and for the destruction or capture of enemy materiel were commonplace, and this raiding was especially critical when one side attempted to hold ground on the other side of the river. After the Americans captured Fort George, for instance, British raids stepped up in severity, attacking not only the men at the fort, but crossing the river themselves to strike at troop muster centers and depots like Black Rock. In severe straits, the American commander George McClure, in command of only 250 men, the rest having been transferred back east, ordered the fort abandoned and burned. As a strategic effort to deny British soldiers shelter, McClure burned the town instead of the fort. Hundreds of people were left homeless in a severely cold December after only a few hours notice, and McClure reported that "every building in Newark is reduced to ashes." Some people allegedly froze to death in the snow, but the number has never been substantiated.

The British retaliated immediately, seizing Fort Niagara (on the eastern side of the river) in a nighttime raid - allegedly British raiders captured a picket and extracted the night's password, and entered the fort in total surprise, bayoneting sleeping soldiers in their tents. McClure reported that the “men were nearly all asleep in their tents, the Enemy rushed in and commenced a most horrid slaughter.” 80 men were killed and 350 captured, along with massive stores of ammunition and supply.

Consolidating their success, the British dispatched more raids, destroying, among others, the town of Lewiston, allegedly at the hands of drunk Native warriors, who left men and women dead in the snow and "eaten by hogs" according to one witness. McClure attempted to raise up the local militia but, due to their unpaid service in prior campaigns, some refused to join, and others did so only to look out for their own families and property. As British commander Phineas Riall made his way to Buffalo, the main force of resistance against them were, ironically, a force of Canadians organized as the "Canadian Volunteers," a patchwork confederacy of malcontents and political enemies of the British military rule of Upper Canada. Among them were Cyrenius Chapin, the American commander, and Joseph Willcocks, a former member of the Legislative Assembly of Upper Canada.

Willcocks joined the Americans as a result of witnessing the barbaric overreach of British control of Upper Canada. Willcocks himself had defeated several efforts by the late General Isaac Brock to prepare for the war because Willcocks - not without some justification - saw them as eroding democratic principles. Having previously served in the earlier campaigns in 1812, Willcocks was influential in recruiting men for the Americans, and provided intelligence to them, assisting in raids and other small-scale actions. The Volunteers, sculpted in no small part by the character of Chapin, were known as "The Forty Thieves," and their reputation had preceded them even before the situation at Buffalo.

According to some, it was Willcocks who convinced McClure to burn Newark, instead of destroying just the fort. But to make a long story short, most the Canadian Volunteers slipped away before the British captured Buffalo, but not before Chapin allegedly bellowed "Every Man for himself & the Devil for us all" before being captured, himself.

The British looted and burned Buffalo, with the assistance of their Native allies, on whom most of the responsibility of the destruction was, of course, pinned. The British regulars, though, took gleeful part. Promising to free any Federalist men (the Federalists, as a party, had resisted the war from its outset) who pointed them toward particularly valuable caches of loot. They kept the promise. Alan Taylor related that "in the two villages, the fires destroyed 104 homes, 43 barns, and 18 stores," a huge swatch of destruction on the small peninsula, which created, as had the burning of Newark, a large group of winter refugees. It's worth quoting Taylor in full, here:

The refugees included John Haddock, a furniture maker and grocer. Initially, he had prospered from the war by supplying troops with coffins, an especially lucrative business given the diseases of the camp. By late 1813 he had “gained a very Handsome Property, a Decent House” and “Plenty of Every thing to Live on.” But on “that Fatal Day” of December 30, the war turned on Haddock. His gains dissolved as “merciless British troops & Indians” pillaged and burned his house and store. Fleeing from “Death and Destruction,” Haddock was reduced to the charity of strangers.

It is worth pointing out that this situation was highly unusual, not only in the context of this war, but of wars between Europeans in general. In most border areas, the war was carried on with the gentlemanly professionalism that get so lampooned by modern armchair historians. It's unclear exactly why the Niagara frontier became so vicious, suffice it to say that it was, and it was seen as unusually so by both sides.

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sources below