While next year is likely to see a host of hikes to our household bills, there are positives ahead too.
With a new year on the horizon, it’s a good time for reflection.
The last 12 months have undoubtedly impacted on our finances, and there’s little prospect of things being noticeably more steady in the year to come.
So let’s take a look at what’s ahead next year, and whether they will be positive or negative for our household budgets.
A decline in inflation
Persistently high inflation has been a real concern for some time.
We have all seen the impact of inflation on our cash with higher costs at the till for virtually everything we buy, particularly things like food when prices are up by 30% on two years ago.
Thankfully inflation looks to have peaked, having dropped to 4.6% in the 12 months to October, compared with 10.1% back at the start of the year.
Importantly that doesn’t mean that things are getting cheaper, merely that those price rises are taking place more slowly, but it’s still an important step.
Borrowing getting cheaper
That high rate of inflation has led to the Bank of England repeatedly hiking Base Rate, but that has spelled trouble for those looking to borrow since the interest rates charged on loans have grown too.
It has had a sizeable impact on the property market too, with those rising interest rates leading to plenty of would-be buyers putting their plans on hold.
The drop in activity levels has fed through into falling house prices too, with prices over the last year down by above 5% according to a variety of indices.
However, mortgage rates are heading south once more, with all sorts of different lenders cutting their rates.
For example, there are now 27 lenders offering mortgage rates below 5%, according to Moneyfacts, compared with just 13 at the start of October.
The expectation that Base Rate has peaked and so will only fall from this point is likely to lead to mortgages becoming cheaper, even before Base Rate is actually cut, spelling good news for those hoping to take out a mortgage.
It should translate into lower borrowing costs for other forms of credit too, like credit cards and personal loans.
Best personal loans: borrow from 5.9%
Reduced National Insurance
Perhaps the biggest measure in the Autumn Statement was the decision to cut National Insurance for both employed and self-employed workers.
The fact that the employed cut will kick in from January means an earlier boost for millions of people than would be the norm, and should mean they get to take home more of their gross pay each month next year.
Obviously, this isn’t simply because the Chancellor wants people to have a more fruitful financial year, but is instead driven by the fact that there is a General Election next year and he wants more people to feel better off and therefore inclined to vote Conservative.
Taking the edge off water bill hikes
April is a brutal month for many of us, since that’s when all sorts of household bills go up. Included in that list are water bills, but there is some potential good news there.
It turns out that water suppliers have, on the whole, done a pretty dreadful job of tackling pollution and leakage levels, and for once there will be some repercussions for this failure.
Ofwat, the water regulator, has ordered a host of suppliers to hand back millions of pounds to customers as a result of these failures, in the form of lower bills from next year.
There is no guarantee that this will mean lower water bills overall, but it does at least mean they won’t be quite as high as they could have been.
Falling savings rates
One of the most positive results of the regular increases to Base Rate over the last year has been the impact on savings rates.
For years savers have had to make do with tiny rates of interest on the money they set aside, yet things have improved dramatically with much more significant rates on offer.
There is a danger that rates may have now peaked, however.
The expectation that Base Rate will start to be reduced next year ‒ even if it doesn’t happen until the latter months of 2024 ‒ means that savings providers feel less inclined to be quite so competitive when setting rates on their deals.
We have already seen savings rates start to decline.
Back in October, the highest rate on offer on an easy access savings account stood at 5.30%, but that has dropped slightly to 5.22%, while the top one-year fixed rate bond rate has slid from 6.11% to 5.85%.
Obviously, nothing is set in stone, and some eye-catching savings deals could be launched, but the signs are there that deals on offer in 2024 are likely to be less appealing.
Rising energy bills
Growing energy bills are once again a concern for many of us.
Ofgem, the energy regulator, has confirmed that the energy price cap will be increased from January. It means that for the typical household on a tariff covered by the cap, annual energy use would cost £1,928.
That’s up by £94 on its previous level, just in time for the coldest period of the year when energy use is at its highest.
What’s more, last winter there was further support from the Government in the form of the Energy Bill Support Scheme which meant that over those most expensive months our bills were trimmed by £400.
There’s no such boost in place this year, though equally, the cap is going to be lower than the Energy Price Guarantee ‒ which had undercut the energy price cap ‒ was set at for the start of 2023.
|
PROMOTION
|
||
|
Higher Council Tax bills
2023 was a painful year for Council Tax, with around three-quarters of councils opting to hike bills by the maximum allowed.
The reality is that even with these increases, most councils face a budget crisis.
They simply don’t have enough cash to cover essential public services, so in all likelihood we will all be subject to further painful hikes to our Council Tax in the year ahead.
Broadband and mobile bills going up
Most broadband and mobile phone networks have it written into our contracts that they can increase our bills every year in line with inflation.
There are a couple of really sneaky aspects to this hike.
First, many of them opt to use the retail price index (RPI) measurement rather than the consumer prices index (CPI) measurement, knowing full well that RPI is not only less reliable but always higher.
What’s more, they don’t just hike bills by the actual rate of inflation, but RPI plus a couple of percent.
For example, Virgin increases bills by RPI plus 3.9%, meaning that even if inflation is zero, you’re still going to see your bill go up by 3.9%.
The communications firms use the reading published in January so we don’t yet know the size of the increases ahead, but given how slowly inflation has fallen it will likely be a noticeable hike.