According to Money Saving Expert, energy bills are rising at the fastest rate since early 2014. In-line with the energy bill hike, according to the same source, most other household bills have also risen, resulting in a 2.4% overall percentage increase in household bills and expenses
The Citizens Advice Bureau has further supported this and revealed that gas and electricity tariffs have risen by three times the rate of inflation over the past 12 months. According to the national charity, the average duel fuel energy bill for customers who are with one of the ‘big six’ energy firms, on a standard variable tariff has risen by £89.00 or 8.3% over the 12 months. But what does this mean? And how can we cut the cost of household bills in our homes? Read the Budget Insurance Blog today to find out more about why this is happening and what we can do to try and save some pennies on our bills.
What is inflation and why has it gone up?
The inflation rate affects everything from the interest rate that we get on our savings accounts to the rates that we pay on our mortgages. But what actually is inflation?
In the UK, there are two specific measures of inflation; the Consumer Prices Index (CPI) and the Retail Prices Index (RPI). Both of these measures look at the price of hundreds of things that we may spend our money on. The Consumer Prices Index looks at items such as cinema tickets, bottles of water and chocolate bars, tracking how those prices have changed over time. The Retail Prices Index is slightly different and includes housing costs such as mortgages and council tax.
The rates of inflation are expressed in percentages. So, for example if CPI is 7% one year and 12% the next, this means that, on average, the goods and services reviewed cost 5% higher than the previous year.
The data that is reported from the CPI and RPI rates is used in many ways by the government and businesses, playing a vital role in setting economic policy. This is because the Bank of England uses inflation to set interest rates. So you see, so many elements are affected by CPI and RPI, from mortgage rates to state benefits and train ticket prices.
What household bills does an average household have?
According to a report carried out by home insurance providers More Than, monthly running costs for owners of a three-bedroom home are on average £1,634. Whilst people who rent a property pay on average £1,576 per month. But what bills make up this cost?
|Energy Bill (gas and electricity)||£91.90|
Aside from the bills noted above, many households have additional bills/expenses such as childcare fees along with different insurance needs dependent upon how many vehicles are run by the household. These costs can soon add up with More Than reporting that ‘for a household with two working adults each earning the average yearly UK pre-tax salary of £27,600 (£1,827.91 per month after tax), it means that between 43% (rented) and 45% (owned) of our post-tax earnings are being spent purely on household bills and on the rent or mortgage repayment’. Wow!
Has there been an increase in all UK household bills?
In August 2017, Money Saving Expert launched it’s ‘Bills Tracker’ which uses data supplied by the Office of National Statistics (ONS) to allow the brand to build a picture of UK household bills and track their increase/ decrease over time. In August the tracker reported a 2.4% increase in a typical household’s bills and expenses year on year.
Here is a list of on average, what household bills have increased from August 2016 to August 2017:
- Rent- 0.9%
- Owner occupier housing costs- 1.9%
- Water costs- 1.8%
- Energy costs- 5.3%
- Council tax-3.8%
- Fuel (Including diesel and petrol) – 5.2% and petrol by 5.1%
- Phone and internet- 2.3%
- TV licence and subscriptions– 1%
- Insurance- 2017, contents insurance increased by 4.4%, car insurance by 13%, travel insurance by 10.1% and other insurance, e.g, health insurance, by 4.5%. The overall increase for insurance was 8%
Why are energy bills rising above inflation?
There are many contributing factors to the rise in inflation, one of which being that commodities are just more expensive. The fall in the value of sterling following the Brexit vote has pushed up the prices of imported good, especially in the case of food and clothing. The increased cost of petrol and diesel is also a contributing factor. RAC fuel spokesman Simon Williams said to The Express “the price has sadly shot up as a result of Storm Harvey disrupting oil refining in Texas, whereas the hike in diesel prices is more down to a two-dollar rise in the price of a barrel of oil over the past week”. Naturally, these hikes in the US has had a knock on effect on UK fuel prices.
What can I do to curb the cost of my household bills?
As we approach autumn and start thinking about turning the heating on, drying clothes inside the house and turning lights on earlier; we start thinking about the costs associated with colder temperatures and earlier sun-sets. Not only that, but with the uncertainty around further inflation hikes, we could all do with being a little savvier now to lessen the penny pinch. Here are our top five tips on how to curb the cost of your household bills.
According to The Mail Online ‘more than one in four households fails to hunt for the best energy deal’ and believe me, there are plenty to be had! And what’s more, you don’t have to search far to find great deals. Using a comparison website such as Go compare, Compare the Market, Money Supermarket or Energy-helpline can help you find a better deal and could even save you significant amounts of money.
Be more energy efficient
There are many ways in which we can all be more energy efficient, most of which require little or no effort. Here are our top picks:
- Only boil as much water as you need in the kettle
- Turn off lights when you are not in the room
- Swap old light bulbs for modern LED ones
- Install draught-proofing to windows and doors or even just buy a fabric draught excluder
- Consider solar panels
- Keep your thermostat on low throughout the day
- Turn off appliances that you are not using; even standby mode uses electricity!
Cancel what you don’t need
Often, we sign up for memberships and subscriptions but then forget all about them even if we no longer use the product or service. Review your bank accounts and see what products/services you pay for, but that you don’t need or no longer use. If you only use your gym membership once a month; is it really worth it or could you just go to a class instead which will cost you £10.00 as opposed to £60.00?
Take stock; are you using what you’re paying for?
Review all of your household bills and check that you are using what you pay for, if you are not, then why not downgrade your tariff for immediate savings. Are you using all of that data that you are paying your mobile phone provider? Do you need unlimited calls? Does the family watch those film channels that you pay extra for? It’s all worth checking, there could be a small fortune to be saved!
Be savvy in the supermarket
The financial website ‘This Is Money’ has claimed that, on average, Britons are now paying £133.00 more on their annual food shop than they did this time last year; this is seven additional supermarket shops. Just imagine, if you were savvier with your food shop, you could save big bucks every month.
What’s next for UK inflation?
The answer is, we really don’t know. We cannot predict the effect that such factors as Brexit will have on the UK economy. Although, according to ‘Schroders Forecasts ‘Inflation in the UK will rise from 0.7% in 2016 to 2.9% for 2017 before easing back to 1.9% in 2018’. We have our fingers crossed!