According to the Consumer Price Index, inflation is currently at 3%. This is the highest rate for over five years, meaning household budgets are being stretched further and further as the average pay is going up by just 2.2%. As the Bank of England has just announced the first base rate rise in over a decade, the pressure is likely to be on even more as mortgage costs will go up for many people as a result. So, here are our top tips to help you ease the impact of inflation upon your income.
Make the most of a savings account – Easy access accounts pay just 0.42% interest on average, seven times less than the current rate of inflation. However, there are a number of accounts available which do beat inflation. For example, Nationwide’s current account pays 5% for a year on a balance of £2,500. Shopping around to make sure you’re receiving the best growth on your money is worthwhile, and could go some way to helping you beat the inflation squeeze.
Don’t be afraid to switch your mortgage – If you’re on a variable rate mortgage, you’re going to end up paying more per month following the interest rate increase. But don’t feel that you have to stick with a rate that’s going to end up eating away at your finances, however. A standard variable rate mortgage of £150,000 on the average rate of 4.5% with 20 years remaining could switch to a lower fixed rate such as Monmouthshire Building Society’s five-year fixed rate mortgage at 1.7%, which would result in a monthly saving of £211.
Make the most of balance transfer credit cards – If you’ve racked up debt on credit cards after struggling to make your monthly income cover your bills, the interest you’ll be paying on the balance will simply end up making things worse before long. However, there are plenty of credit cards available which offer 0% on balance transfers, some for as long as four years, helping you to take control of your credit card debt.
Keep an eye on when your fixed rate energy deal will end – Once a fixed rate deal ends, your gas and electricity providers will usually move you onto a standard variable tariff, meaning your energy bills will most likely increase significantly. Make sure you switch to a new fixed rate deal before this happens to ensure you’re on the best rate available.