Britons face a punishing rise in the cost-of-living in the coming months with official forecasts expecting energy bills to rise by 40 per cent in autumn, while clothing and food prices will both go up by 8 per cent this year.
The Bank of England expects the Ofgem energy cap to rise by an average of £788 from £1,971 in April to £2,759 in October, making it the biggest factor in rampant inflation that the Bank said is now heading towards 10 per cent.
Its Monetary Policy Committee report issued this week also said fashion retailers expect to put up their prices by between 5 and 8 per cent this year, while supermarkets forecast price increases ‘possibly exceeding 8 per cent’.
The most recent Office for National Statistics figures for the average household spend on clothing and footwear gives a figure of £23.40 a week, or £1,220 a year – meaning this could rise by £98 to £1,318 under the projection.
As for food costs, research by Kantar last week put price rises for supermarket shoppers in monetary terms, saying that the average food bill could increase by £271 this year following a 5.9 per cent year-on-year rise to last month.
Rising prices will impact most sectors of the economy with the Bank unveiling an updated inflation forecast that now peaks at 10.4 per cent at the end of this year – more than double its highest inflation forecast pre-pandemic.
And the Bank is now forecasting real post-tax income will fall by 3.25 per cent this year – equivalent to an income fall of around £1,200 for the average household, which would be the weakest year in records dating back to 1990.
Mortgage borrowers across Britain also now face paying thousands of pounds more for their home loans, after the Bank yesterday raised its base rate for the fourth time in less than five months to a 13-year high of 1 per cent.
David Hollingworth, of L&C Mortgages, added: ‘Those that don’t take action to pin down their rate could see their mortgage become an increasing burden.’
The average rate on a two-year fix stands at 3.03 per cent, up from 2.34 per cent in early December, according to analysts Moneyfacts. The average standard variable rate is 4.78 per cent.
More lenders raised rates yesterday, following others who pulled their cheapest deals last week. NatWest confirmed it would be increasing some of its two-year fixed deals by up to 0.35 percentage points.
In addition, rail commuters could see their season tickets rise again by hundreds of pounds next year, with fares potentially rising by up to 12 per cent.
Financial experts predict annual growth on the Retail Prices Index (RPI) – the measure used by the Government to set train ticket price increases – could hit 11.8 per cent in July, which would be the highest level since the 1980s. The RPI figure in July is normally used to set the fare increase in the next January.
Yesterday, members of the Bank’s nine-strong Monetary Policy Committee voted 6-3 to increase rates from 0.75 per cent to 1 per cent – the fourth time in a row that they have voted for a rise – taking rates to a level not seen since 2009.
Three members called for a bigger increase to 1.25 per cent due to worries over rocketing inflation, with the Bank ramping up its forecast for Consumer Prices Index (CPI) inflation to rise from 7 per cent currently to more than 10 per cent in October – its highest level for 40 years – due to soaring energy prices.
In a grim set of forecasts, the Bank predicted that growth will contract in the final three months of 2022 as the cost squeeze sees households rein in their spending.
The UK is set to narrowly miss a technical recession, as defined by two quarters in a row of falling gross domestic product (GDP).
| Average mortgage rates | May 2017 | May 2020 | May 2021 | Nov 2021 | Apr 2022 | May 2022 |
|---|---|---|---|---|---|---|
| Standard variable rate (SVR) | 4.59% | 4.55% | 4.41% | 4.41% | 4.71% | 4.78% |
| Two-year fixed mortgage | 2.30% | 2.09% | 2.57% | 2.29% | 2.86% | 3.03% |
| Five-year fixed mortgage | 2.89% | 2.35% | 2.79% | 2.59% | 3.01% | 3.17% |
| 10-year fixed mortgage | 3.15% | 2.64% | 2.97% | 2.99% | 2.94% | 3.21% |
| Average rates shown are as at the first available day of the month, unless stated otherwise. Source: Moneyfacts.co.uk | ||||||
| Average savings rates | May 2017 | May 2020 | May 2021 | Nov 2021 | Apr 2022 | May 2022 |
|---|---|---|---|---|---|---|
| Easy access | 0.38% | 0.41% | 0.16% | 0.19% | 0.33% | 0.39% |
| Notice account | 0.55% | 0.92% | 0.36% | 0.53% | 0.66% | 0.78% |
| Easy access ISA | 0.63% | 0.63% | 0.23% | 0.26% | 0.38% | 0.46% |
| Notice ISA | 0.76% | 0.89% | 0.33% | 0
David Hollingworth, of L&C Mortgages, added: ‘Those that don’t take action to pin down their rate could see their mortgage become an increasing burden.’ The average rate on a two-year fix stands at 3.03 per cent, up from 2.34 per cent in early December, according to analysts Moneyfacts. The average standard variable rate is 4.78 per cent. More lenders raised rates yesterday, following others who pulled their cheapest deals last week. NatWest confirmed it would be increasing some of its two-year fixed deals by up to 0.35 percentage points. In addition, rail commuters could see their season tickets rise again by hundreds of pounds next year, with fares potentially rising by up to 12 per cent. Financial experts predict annual growth on the Retail Prices Index (RPI) – the measure used by the Government to set train ticket price increases – could hit 11.8 per cent in July, which would be the highest level since the 1980s. The RPI figure in July is normally used to set the fare increase in the next January. Yesterday, members of the Bank’s nine-strong Monetary Policy Committee voted 6-3 to increase rates from 0.75 per cent to 1 per cent – the fourth time in a row that they have voted for a rise – taking rates to a level not seen since 2009. Three members called for a bigger increase to 1.25 per cent due to worries over rocketing inflation, with the Bank ramping up its forecast for Consumer Prices Index (CPI) inflation to rise from 7 per cent currently to more than 10 per cent in October – its highest level for 40 years – due to soaring energy prices. In a grim set of forecasts, the Bank predicted that growth will contract in the final three months of 2022 as the cost squeeze sees households rein in their spending. The UK is set to narrowly miss a technical recession, as defined by two quarters in a row of falling gross domestic product (GDP). |