Cost of living crisis?

Why is the cost of living increasing?

The UK’s rate of inflation rose to 6.2% in the 12 months to February 2022 – up from 5.5% in January, according to the Office for National Statistics (ONS). Only today, Sky news is reporting that the rising fuel costs mean this has risen again to 7% and the increase in energy bills has still not been considered in these figures -meaning we can reasonably expect it to rise further when they are.

This is currently the highest inflation has been, since 1992, when it was 7.1%.

These statistics are indeed worrying, but what do they mean for families, and what can you do to help lessen the impact?

What is inflation, and why is it rising?

Inflation refers to the rising costs of goods and services, or the fall in the value of your money. It tends to result from too much demand chasing too few goods, or limited services, leading to the increase in prices for them. The ONS visits thousands of shops around the country, and collects the prices of specific items. While the prices of some things, such as potatoes, have fallen since 2017, the cost of most items has risen – some more sharply than others. In addition, the costs of services are included, which then gives a single value representation of the increase over a period of time.

The rising inflation has been attributed to several factors, including, the global supply chain issues as a result of the Coronavirus pandemic, the change in the energy price cap, and the war in Ukraine. The increases in National Insurance which came into effect this month, will also hit some families harder than others.

What does it mean for me?

In simple terms, inflation increases your cost of living. Your money will buy you less today than it would last month. Households are feeling the pinch, with weekly food shops, filling the car and heating the home all getting more expensive. Wages are not rising to keep up with these increased costs meaning we have less money each month. According to a large university study, the Financial Times is reporting that Britons are more worried about the current cost of living crisis, than they are about Covid, with 38% of Britons now saying they are worried about their finances.

What can I do?

As Britons become increasingly concerned about the rising cost of living, there are some things we can all do to help lessen the impact;

1. Budget – try and work out a budget, so you are not spending more than is coming in, work out what your essential costs are, and what can you try and cut back on?
2. Review your direct debits – how many of us have direct debits leaving our account, and don’t know what they are? Check your direct debits and see if you are still paying for things, you no longer need or use.
3. Review your debt – are your current debts becoming unmanageable? Or could you pay less for them? Consolidating credit cards, store cards, and loans can sometimes reduce the monthly commitment – reducing the pressure on a monthly basis. It is worth noting that you may pay more interest in the long run, but a review of your options will allow you to make an informed decision about what is best to do.
4. Check your insurances – do you review your home insurance every year or just let it auto renew? Have you reviewed your Life Insurances in recent years? Reviewing these policies can sometimes make a big difference to the cost of these.
5. When does your mortgage rate need reviewing? When your fixed rate ends, your mortgage will revert to the lenders ‘standard rate’ – this is likely to be higher than the rate you have been paying. You can review your mortgage up to 6 months before this rate is due to end, securing a good deal to start once the current deal ends. If you’re on the standard rate already and want to review your options then try not to delay and contact us.
6. Meal plan, and write a list. Making a meal plan, and sticking to your shopping list can help you avoid unnecessary spending in the supermarket.

How can Blackthorn Financial Services Ltd help me?

At Blackthorn Financial Services our team of specialised advisers can help you review your debts, mortgage, and personal insurances – such as home insurance and life insurance. We are fully independent and our unbiased advice comes with no fee for Mortgage and Insurance Advice. Meaning we can help you to see your options with regards your finances with no cost to you.

We may be able to save you money on your insurances, consolidate your debts or help you secure a new mortgage deal.

These are worrying times for lots of households, so please get in touch if you’d like to see if we can help.

Fee Free Mortgage Advice. Like all other brokers, we receive a payment from the lender when the mortgage completes. The difference is that unlike other mortgage brokers, we simply choose not to charge our customers a fee on top of this.

If you have accumulated large overdrafts or credit card bills, and are finding it hard to reduce the outstanding balances, then a re-mortgage could be used to reduce your monthly payments. Please be aware that if you are increasing your mortgage to repay financial commitments then you may be transferring an unsecured debt to a debt secured against your home. If the repayment term is longer, then you may ultimately pay more interest on the debt over that term. Think carefully before securing other debts against your home.

Your home may be repossessed if you do not keep up repayments on your mortgage.