How Can I Prepare for the Cost-of-Living Crisis?

The cost-of-living crisis will hit everyone – landlords and tenants alike. So how can you prepare for it?

It has been a long few years and it seems it’s just one crisis after another, with the cost-of-living crisis following swiftly on the heels of the pandemic and multiple lockdowns. But what exactly is causing the crisis?

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  • Base rate rise. The Bank of England raised the base rate to 0.5% on 3rd February 2022, a day that has become known as Black Thursday. This followed on from a previous rise in December 2021 – the first back-to-back rise since 2004
  • Inflation outstripping wages. In January 2022, the Office for National Statistics found that wage growth rose to 4.2% in the last quarter of 2021, but inflation had hit 5.4% in December 2021, thanks to increased energy and fuel costs
  • Energy bills rising. As well as the base rate increase, Black Thursday also saw Ofgem announce that the energy price cap will be raised by a staggering 54% from 1st April 2022. Already, people are sharing their projected bills on social media and for many the increase runs into hundreds of pounds
  • Energy rating increase potentially passed onto tenants. There is a proposed increase to EPC ratings on rental properties that is likely to come into force in December 2025. Designed to make properties more energy efficient, with so many older homes across the UK requiring major update to hit targets, over half of landlords have said they will need to pass that cost onto tenants – who may already be struggling with bills and rent 
  • Pandemic hangover. We cannot forget the impact that the pandemic had. With close to two years of on-and-off lockdown, work-from-home and job losses, there is not a sector that hasn’t felt the pinch in some way. So it’s important to remember that we are still recovering from that and learning to live with Covid-19, which is still impacting the lives of many 

What can you do to prepare?

Whether you are a landlord or tenant, you will need to do all you can to weather the storm. Bear in mind that both landlords and tenants will be affected in some way by this crisis, so this is the time to really cement that relationship and work together, keeping the lines of communication open as much as possible.

Landlords should be considering:

  • Protection against arrears. While you might not want to spend more than you need to, £299 per property per year for Rent Guarantee Insurance is a small outlay when you consider that your tenant could fall into several months of arrears. Mashroom’s RGI pays out on the first missed payment and even covers part payments
  • Preparing for emergencies. Again, you may want to stop spending rather than spend more, but Home Emergency Insurance ensures that you don’t have to dip into your own pocket should something happen at your property. Make sure you have all the insurance you need – you can budget for insurance, but you cannot see the future and budget for the unexpected.
  • Getting expert advice. Book a call with your mortgage advisor to discuss the best time to remortgage to keep your costs low. If you’re looking to expand your portfolio, look for properties that you won’t have to spend money on to improve (particularly check their energy rating)
  • Spreading the cost on energy updates. The proposed updates to EPC ratings look likely to come into force around December 2025 and will probably move the minimum rating up to C. Take a look at your current EPC rating and start planning updates now so you can spread the cost over the next couple of years.
  • Using an expense tracker to keep an eye on things. When times are tough, it’s tempting to stick your head in the sand, but the best thing you can do is keep an even closer eye on your expenses so you can adjust your spending if necessary. Our free Expense Tracker makes this really easy to do, so just make sure you are checking in regularly

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Tenants can also make adjustments to help them weather the crisis too:

  • Look at your bills. While outgoings like rent are fixed, could your energy bills be cheaper? Shop around to see if you can find a better deal and you could even ask your landlord about installing a smart meter, so that you can keep a daily eye on your usage
  • Change your habits. Energy bills are a source of concern for many, so look at how you can change your habits to save a little. Make sure you’re not leaving anything on if you’re not in the room, for example. If you’re having friends over to catch up, do you need the TV on too? While this may feel extreme, little adjustments like this could really help you cut down your bills
  • Look at your income/outgoings. Take the time to go through your finances and understand your outgoings – is there anywhere you can save here? This could mean swapping out some of your outgoing for cheaper alternatives, or cutting them altogether if you decide you don’t really need them
  • Can you save? While this may seem like an odd question as costs spiral ever upward, it’s an important one. Whether you are saving towards a deposit, future travel or just for a rainy day, savings are important, giving you something to fall back on should you need it. When looking at your income and outgoings, look at your disposable income and see how much of it you can save each month. If you are looking to save for a deposit, book a call with our mortgage advisors who can give you free advice on how much you will need to save
  • Keep an eye on interest rates for credit cards. Interest rates on credit cards are usually variable, so don’t ignore any updates from your credit card company – make sure you know the interest rate you’re on and keep your usage as low as possible so you’re not racking up lots of interest
  • Consider your cover. While you probably don’t want additional outgoings, if you can, consider Contents Insurance, as this will protect expensive purchases in the event of loss or theft. Mashroom’s cover starts at £3.12 and is on a flexible monthly contract, so you can stop it at any time
  • Speak to your landlord if you’re struggling with rent payments. If the worst happens and you find yourself struggling to make ends meet, speak to your landlord as soon as possible. You may be able to negotiate a payment plan or time to find a cheaper place to live if you give them a heads up early

Both tenants and landlords alike should keep an eye on their finances, as well as the news, in cast the government announces any support that you’d be able to claim. Ultimately, the cost-of-living crisis will affect everyone, but with some planning, you can take care of yourself and your family.

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