Home Inverness colorado loans How is inflation hitting households and what can we expect in the coming months?

How is inflation hitting households and what can we expect in the coming months?

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Inflation is now at its highest level in 10 years and is expected to continue rising next year before falling back to the Bank of England’s 2% target.

Households are seeing significant increases in the cost of living which are beginning to weigh heavily on their budget.

What is the cause of the situation, what can be expected in the coming months and what can households do to deal with it?

(PA Graphics)

– Where do the price increases come from?

The annual rate of increase in consumer prices fell from 3.1% in September to 4.2% in October, largely due to rising energy and fuel costs associated with disruptions in the economy. global supply chain, which has had a knock-on effect on the price of food and other furniture. and household products.

Energy bills for 15 million homes rose on 1 October by at least £ 139 to an average of £ 1,277 a year – a record – below Ofgem’s latest price cap.

The increase was driven by an increase of more than 50% in energy costs over the previous six months, with gas prices hitting an all-time high as inflation surged amid the easing of restrictions pandemic.

Oil prices were also responsible for their share of the agony of inflation. Around the same time last year, parts of the UK were facing movement restrictions, so gasoline prices fell to 113.2 pence per liter, but in October they hit 138 , 6 pence. This means that refueling a 50-liter car now costs £ 12.70 more than at the same time last year.

Drivers have seen the effects of inflation when they fill up their cars (Joe Giddens / PA)
Drivers have seen the effects of inflation when they fill up their cars (Joe Giddens / PA)

– What else increases the price?

Supply issues are also leading to shortages of goods, including building materials and computer chips, pushing prices further up.

Those who eat out face higher menu prices after government support for businesses ended during the pandemic – like the reduction in VAT for hospitality -.

Used car prices – up 4.6% in October and 27% since April – also continued to push inflation up. A shortage of new cars has forced more and more people to consider used vehicles. Meanwhile, supply has been hampered by a shortage of parts swaps on new cars, fewer year-old cars on the market after weak sales last year and people extending leases to do so. faced with the shortage of new cars on the market.

– What will the next few months look like?

The latest inflation data is a huge warning to households of serious pressure ahead on their budgets. While the Bank of England is now warning of inflation above 5% early next year, it is likely that this period will remain an uncertain and uncomfortable time for many.

Many younger families in particular have little experience with such sharp price increases. With Christmas next month and tax hikes slated for April, it could be a tough time financially for many of them.

It also seems increasingly likely that the Bank of England will raise interest rates at the next opportunity, so households should also prepare for rising mortgage costs and other loan repayments.

Consumers may need to consider limiting their spending (Dominic Lipinski / PA)
Consumers may need to consider limiting their spending (Dominic Lipinski / PA)

– What can households do to try to balance the budget?

There’s no getting around this – households need to start thinking very carefully about their general spending to counter price hikes they can’t control, like energy and fuel.

A quick glance at the monthly bank statement should be a good start. Always shop around and use comparison sites for phone, broadband, and insurance rather than just rolling over to the next year to keep costs to a minimum.

Find out if the subscriptions are still useful and offer a good deal – many people signed up for new services like Spotify, Netflix, or Sky during the lockdown and may no longer use them as much.

Consider buying private label groceries and set a strict, affordable supermarket budget. Supermarket loyalty programs can help save money.

Another way to stretch household budgets further is cashback sites and their welcome offers.