11:55 02 May 2013
We may have narrowly escaped entering a triple dip recession, but with millions of people still struggling to meet everyday living costs, it’s clear that we are far from out of the woods yet.
According to figures published last week by the Office for National Statistics, the UK economy grew by a meagre 0.3% in the first three months of the year. Although the Chancellor, George Osborne has described this growth as ‘encouraging,’ households across the UK are facing an income squeeze that makes it a monthly struggle to make ends meet.
Housing charity Shelter reports that it has seen a 40% increase in the numbers of callers in England helped with housing costs, arrears and other debt issues, while in the last six months alone, visitors to its online housing costs advice service have doubled.
Separate research from Lloyds TSB found that annual spending on essential items such as food and drink and gas and electricity bills rose by 12.5% in March, yet two thirds of people have seen no change to their income or have received less over the past 12 months.
Patrick Foley, chief economist at Lloyds TSB, said: “Whilst growth in spending on essential items isn’t particularly high, consumers are under increasing pressure again because of slow growth in their incomes. With reductions in benefit payments hitting this year, and little sign of improvement in the Eurozone to drive increased business confidence, this pattern looks likely to continue throughout 2013. Sustained recovery in the economy, and in consumers’ finances, seems some way off yet.”
Here, we look at some of the ways households can fight back and relieve the strain on their family finances.
Cut housing costs
If you are a homeowner, review your mortgage and see if you can make savings by remortgaging to a cheaper deal. For example, according to our partner broker, London & Country Mortgages, the average standard variable rate is currently 4.75%. Monthly payments at this rate, based on a 25-year £150,000 repayment mortgage would cost £855 a month.
However, Norwich & Peterborough Building Society is currently offering a 2.24% two-year fixed rate deal with a £295 arrangement fee, which would bring the monthly cost of the same £150,000 mortgage down to £653 a month. Over the two-year fixed rate period, this would represent a saving of £4,547 compared to staying on the standard variable rate. However, the N&P deal is only available to those with at least 40% equity in their homes.
Reduce borrowing costs
As well as making sure you aren’t paying over the odds for your mortgage, look to see where you can reduce other borrowing costs. Most credit cards, for example, charge a typical annual percentage rate (APR) of more than 17%, but you could reduce this right down to 0% by switching your debts to a balance transfer card. For example, Barclaycard’s Platinum Credit Card with Extended Balance Transfer deal offers 26 months at 0% on balance transfers, although there is a transfer fee of 3.1%. Make sure you pay off what you owe during the interest-free period, as after this the card has a representative APR of 18.9% (variable).
Shop around for insurance
When it comes to insurance, loyalty rarely pays, so don’t underestimate how much you might be able to save by shopping around for your car and home insurance every year. For example, according to our figures at MoneySupermarket, 30% of consumers who shop around for their car insurance could save up to £426.12 a year, while 10% of consumers who shop around for home insurance could save up to £228.62 a year. Combined, that adds up to an impressive £654.74, just for a few minutes of your time.
Reduce food bills
Despite many of us feeling the pinch, a worrying amount of food is wasted every year. To help keep food bills down, and prevent wastage, write a menu plan at the start of every week, so that you only buy what you need when you go shopping. If you work and buy lunch out every day, consider taking in a packed lunch at least every other day to help reduce your outgoings.
Keep a lid on energy costs
Anyone concerned about steep gas and electricity bills may want to consider locking into a fixed energy deal to protect themselves from rising prices. For example, EDF Energy’s Blue + Price Promise February 2015 deal enables consumers to fix their energy costs for near two years. The average annual cost for a dual fuel customer on this tariff is £1,192, assuming they pay by Direct Debit.
If you aren’t concerned about locking into a fixed deal and just want to reduce your costs as much as possible, then SSE’s Discount Energy Bonus October 2014 tariff, which is a variable deal and so could change at any time, costs an average of £1,146 a year for a typical dual fuel customer.
Claim what you’re entitled to
People on low incomes could be missing out on valuable benefits because they think they aren’t eligible for them. New research by Turn2Us, part of national charity Elizabeth Finn Care, found that 78% of people on low incomes who are currently not claiming any means-tested benefits do not think they would be entitled to any support. This is despite the fact that more than one in five has seen their income fall over the past year, and over one in 10 has had their working hours reduced.
To find out if you might be eligible for financial help, log on to the website www.benefitsawareness.org.uk and use the Benefits Calculator which will let you know which benefits and tax credits you might be entitled to, and how much you might receive, as well as how you can make a claim.
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