Rising living costs combined with falling earnings are placing mounting pressure on household budgets, making it more important than ever to look at ways to reduce monthly outgoings.
Inflation rose to 2.9% in May, its highest level in four years, with rising package holiday and computer game costs helping to drive up costs. The fall in the value of the pound since last year’s referendum vote to leave the EU has increased the cost of imported goods, which has been one of the key factors behind rising inflation.
Whilst the cost of living is increasing, wage growth is slowing. Average earnings rose by 1.7% excluding bonuses and 2.1% including bonuses in the three months to April, according to latest figures from the Office for National Statistics.
Once inflation is factored in, earnings fell in real terms by 0.6% over the same period.
How to ease the pressure on your purse-strings
Shrinking wages will put the squeeze on monthly budgeting for many.
One of the best ways for people to keep outgoings to a minimum is to review their mortgage, which is likely to be their single biggest monthly cost.
Switching to a better deal can often result in savings which run to thousands of pounds a year, yet recent research by L&C mortgages found that 58% of households have never remortgaged. As many as 1.1m households are collectively wasting £2.78billion by sitting on the wrong mortgage deal.
More than a third (36%) of homeowners are paying their lender’s Standard Variable Rate (SVR), even though these are typically much higher than other mortgage rates.
As they are variable, they are also likely to rise if interest rates go up, which could mean even higher monthly payments.
If you haven’t reviewed your mortgage recently, check what rate you are on and see if you can find a better deal elsewhere.
Higher Inflation puts the Squeeze on Monthly Budgeting