Black Thursday: New Cost-of-Living Crisis for British Households
It was announced today that the Bank of England is raising interest rates to 0.5% from 0.25%, which is sure to fuel a financial crisis for households throughout the country.
This is the second increase since the rates were slashed in early 2020, thanks to the pandemic, and is the first back-to-back rise since 2004. While the increase comes in response to growing inflation, energy regulator Ofgem also announced today that it will raise the price cap by 54% from 1st April 2022, a fatal combination for British households.
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How will this affect my household bills?
You and your tenants will see a hefty increase in your bills, averaging an extra £693. This is dreadful news for people already struggling with the rising cost of energy, with 44% reporting at the end of last year that they were not using their heating even in the winter.
62% were already worried about how they’d pay their bills, so this news will be yet another blow.
However, the Chancellor Rishi Sunak was aware of the impact this would have across the country, particularly on the poorest households and was ready to unveil his £9billion cost-of-living crisis package.
Will government support help?
The package includes:
- £150 council tax rebates for A-D band homes
- £200 government-backed discounts to temporarily keep electricity bills lower for everyone. However, this discount must be repaid over five years.
- A £150million ‘discretionary fund’ for local authorities to distribute to the families most in need
Despite the proposed support, Mr Sunak has admitted that it would be ‘wrong and dishonest’ to claim this package will take all the strain off bill-payers. In his words, ‘the vast majority’ of households would enjoy a £350 benefit – but as the average rise is due to be around £693, this benefit only deals with half the problem.
What can I do to protect myself and my tenants?
The government plan is, in Rishi Sunak’s words:
[to] spread the worst of the extra costs of this year’s energy price shock over time.
While this ‘spread the cost’ approach may provide some short-term relief, it’s important to remember that discounts will need to be repaid and current support only provides half of what is needed.
- Check in with your tenant. Make sure the lines of communication are open, so if your tenant is struggling to juggle rent and bills, you’ll be the first to hear about it.
- Bring plans forward. If you were planning any updates to your properties to make them more energy efficient, can you bring them forward? These updates may shave some much needed pounds off your tenant’s energy bills.
- Take out cover now. We saw Rent Guarantee Insurance leave the shelves during the pandemic, just when it was most needed, so don’t wait for the cost of living crisis to get even worse. RGI will protect you if your tenant falls into arrears.
- Monitor your budget. Now is the time to start counting the pennies. Make sure you are keeping on top of your expenses and adjusting your outgoings down as much as you possibly can. Look for free or lower priced solutions when it comes to listing your property and storing your legal certification. A move to Mashroom, with our packages, could save you a lot in the long run.
- Get on top of your mortgage. Interest rates could go up again, so if you were thinking about getting a new buy-to-let or remortgage, get your call booked in as soon as possible so you aren’t caught out by further increases