Earnings growth, Energy Price Cap falling, better mortgage rates, and more reasons to be (somewhat) cheerful

Following years of doom and gloom, there is finally some good news about our money. Here we look at four reasons to be slightly more cheerful this Summer.

There’s no denying that the past few years have been tough for most Brits – financially and otherwise.

As the cost-of-living crisis raged, UK households faced the highest tax burden since World War Two and inflation peaked at 11.1% in October 2022.

However, several pieces of data released in recent days have suggested there is reason to be (a little bit) more optimistic about the nation’s finances.

In this article, we celebrate (or at least acknowledge) some of the recent pieces of good news to come out of the economy over the past week.

1. An end to unfair mobile price hikes

As we argued in our recent opinion piece, mid-contract price increases are a particular bugbear at loveMONEY.

Under this tactic, many mobile phone, broadband and pay TV providers have altered their terms to incorporate price rises that are tied to future inflation rates.

This leaves customers facing huge uncertainty over how much they will pay and at the mercy of something they cannot control.

We were thrilled to see that the regulator is finally stepping in to put an end to this sneaky practice.

Under new rules announced last week, providers will need to outline any price hikes down to the penny that are written into a customer’s contract.

Additionally, providers will need to be transparent about when these changes will take place.

The new rules will come into force in January 2025 – although we’d have liked to have seen change sooner, the move is nevertheless a positive one.

Learn more about the ban

2. Energy bills are falling

At the beginning of July, the Energy Price Cap fell by 7% – this is the maximum providers can legally charge per unit of energy.

According to regulator Ofgem (which determines the cap), the average household bill will now be £1,568 – which is down from £1,690 in April to June.

On top of this, the practice of energy switching could be making a comeback, with several attractive deals entering the market.

For instance, EDF Energy’s Ensure tariff guarantees to stay £50 below the Price Cap for 12 months.  E.on’s  Next Pledge V5 deal promises to remain 3% below the Price Cap for 12 months.

3. Earnings are FINALLY beating inflation

Wages are outstripping inflation by the biggest margin in more than two-and-a-half years, new research from the ONS has found.

According to the latest labour market data, average yearly earnings in Britain grew by 5.7% for the March to May quarter.

Once the rate of inflation under the Consumer Prices Index has been taken into account, earnings are up by 3.2%, which is the largest gap since August 2021.

In theory, this should mean that the average worker has more disposable income, which can prove invaluable during a cost-of-living crisis.

What the average person earns in different countries

4. Mortgages are becoming more affordable

With mortgages being the biggest expense for many, more attractive deals coming on the market is certainly good news.

In recent days, both TSB and NatWest have announced that they are cutting rates for homeowners.

NatWest will reduce rates by up 0.23% and TSB has announced that it will drop rates on remortgages by up to 0.15%.

These announcements follow reductions from Nationwide, Barclays, HSBC and Santander in recent weeks.

Furthermore, many experts are predicting that the Bank of England will cut the Base Rate in the near future.

As interest rates on mortgages are typically tied to the Base Rate, this could mean that more cuts are on the horizon.

Are the good times back?

As the sun comes out and many of us head off on our annual holiday, we would like to say that the clouds are finally starting to clear.

Sadly, however, it would be premature to declare that the troubles of the past few years are behind us.

Although earnings growth is at 5.7%, this is nowhere near enough to offset the levels of inflation we experienced during 2022 and 2023.

On top of this, frozen Income Tax thresholds are dragging more of us into paying tax on our earnings or even paying tax at the Higher rate.

Likewise, this month’s fall in the Price Cap isn’t necessarily a sign of things to come.

Worryingly, energy experts Cornwall Insight predict that prices will again rise in October, which could put the average bill up to £1,761.61 during the colder winter months.

What does this all mean? While we should, of course, celebrate the small victories, we need to be realistic about the future and recognise that the outlook will remain challenging for some time.

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