Displaying items by tag: cost of living

The Bank of England's interest rate hikes, aimed at reducing inflation, have led to a slowdown in the UK housing market. Recent data reveals a significant drop in house prices, the largest since October 2011. This decline, most pronounced in London, reflects the impact of pandemic-driven price surges. Despite this decrease, the housing market faces long-term challenges. Interest rates have risen, functioning slowly like drip filter coffee, and have a delayed effect on the market. This delay is due to the time taken for banks to adjust mortgage rates and for these changes to be reflected in official statistics. The latest data from the Office for National Statistics (ONS) show a 1.2% drop in house prices over a year, marking the fastest decline in over a decade. Financial markets anticipate rate cuts next year, which could revive the market. However, the overall cost of living remains high, with increased expenses from food to household bills. Over a million people will face higher mortgage costs next year.

The UK has experienced 14 consecutive interest rate rises, affecting both mortgage holders and savers. According to the Office for Budget Responsibility (OBR), in 2023 the gains from higher savings returns have surpassed the costs of rising mortgage rates, slightly increasing real household disposable income. However, this improvement is flanked by decreases in disposable income in 2022 and an expected drop in 2024. The impact of these rate hikes has been uneven, with many having minimal savings and large sums in non-interest-bearing accounts. The OBR warns of further financial strain in 2024 as fixed-rate mortgages expire, leading to higher debt interest payments and a decline in disposable income. This forecast remains significant even if the Bank of England does not increase rates beyond the current 5.25%. The situation is also impacting non-homeowners, contributing to rising rents. Overall, the OBR suggests tougher financial times ahead, even without additional rate hikes.

House prices fell at their fastest annual rate in 14 years in August as rising mortgage rates affected the market. ‘We may be seeing a greater impact from higher mortgage costs flowing through to house prices,’ said the Halifax director of mortgages. ‘The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous fifteen years.’ First-time buyers have welcomed a fall in prices but face relatively high repayment costs, alongside other cost-of-living pressures such as higher prices in the shops. On the flip side, wage growth has helped affordability. Despite the fall in property values, the Halifax said that prices were only back to the level seen at the start of last year, and still £40,000 higher than before Covid.

Last week we prayed about school uniform costs. This week we can be grateful that Marks and Spencer are offering families money off children’s clothes if they donate school uniform hand-me-downs to help parents struggling amid the cost of living crisis. The second-hand uniforms will be sold via Oxfam’s high street chain and a new ‘back-to-school’ eBay shop.

Loan sharks say business has never been so good, but there are huge risks attached to this type of borrowing. One loan shark calls himself an ‘enforcer’- referring to what happens if payments are missed. ‘The car is damaged, house windows and doors are pulled out, and even people get badly beaten.’ He says beatings are rare but admits to breaking legs, smashing teeth or eye sockets, leaving people hospitalised. Nearly all his customers are regulars, paying off debts within two or three months - then they are back a few weeks later. With high inflation demand has soared. He now hears from single mums and families needing smaller amounts of £500 to £1,000 to pay for gas or electricity or for groceries. Interest rates up to 50%, or ‘double bubble’ terms, where the original loan is doubled each month, are often applied. Most clients would accept any terms, out of desperation. Borrowers are usually lower-waged, full-time workers.

A Christian economist has urged churches to consider setting up benevolence funds to help members struggling with the cost of living as inflation proves more persistent than expected. Former IMF economist and government debt manager Dr Paul Mills said the step was needed for those on fixed incomes or losing their jobs. He was speaking after an economic advisor to the Chancellor said the Bank of England may need to spark a recession to finally get rising prices under control. The bank's target from the Government is to get inflation down to 2%, but the public has yet to see the pain that is coming through the economy from interest rate rises. On 22 June the base rate increased to 5%, a bigger increase than expected. Dr Mills said it would help to pray for the nation, and for medium- to long-term steps to turn things around.

The YMCA will continue its summer activities to entertain and feed young people and children, particularly from struggling families. It wants the Government to invest more in youth projects to avoid crime down the line and help desperate families as the long summer holidays loom. Richard James has urged churches to rally around their communities and offer similar initiatives for the children in their parishes. Experts foresee a difficult summer for families struggling with the cost of living crisis, as children will not receive free school lunches. James has seen a noticeable difference in children's experiences using the YMCA’s summer services in recent years and says it feels as if every year is another challenge. He says, ‘Some boroughs’ budgets have zero pounds per young person per head.’ In 2020, YMCA England reported a billion-pound decline in the amount of funding afforded to youth services by local authorities, with a decline of 69% since 2010. See

‘We have a low-wage, high-welfare economy, which means people depend continuously on tax credits and all sorts of other welfare help in order to get by. That is not a sustainable situation for millions of households up and down the country’, says Christian economist Professor Adrian Pabst. As the cost of living crisis continues, the prospect of corporations engaging in increasing the cost of items at the shopping till to keep their profits high is facing investigation by the Competition and Markets Authority (CMA) amid ‘ongoing concerns about high prices’. The CMA is looking at whether increases are linked to ‘any failure in competition’. Recently, Tesco’s chairman said it was ‘entirely possible’ that food producers are hiking prices more than necessary. Professor Pabst asks, ‘Do workers deserve a pay rise to match inflation? Christians should be on the side of the dignity of labour, not siding with private profit.’

Independent Christian economist Bridget Rosewell, previously economic advisor to the Greater London Authority, said, ‘I'm expecting the economy to be in an uncomfortable place and we shouldn't lose sight of the long term, in the short term.’ The Bank of England has raised interest rates twelve times in a row and believes inflation will fall slower than predicted as food prices stay stubbornly high. Interest rates take a while to feed through into prices but more stable prices will eventually come through. People with mortgages should expect their interest payments to rise. Pray for people to not overextend themselves or take out loans if they are not sure how they will repay them. Ask God to remove envy and the love of mammon across the UK so that people do not think that they have to have everything that others have. 

The amount suppliers charge for energy was cut by Ofgem to £3,280 as wholesale prices fell. But bills will still rise in April as government help eases. Ofgem's announcement does not affect each household’s payment for energy units but it reduces costs that the government faces. Average household bills will rise from £2,100 to £3,000 annually in April because government help (Energy Price Guarantee) becomes less generous and a £400 winter discount on bills ends. The TUC’s general secretary said, ‘Energy bills are out of control. The government must cancel April's hike. As costs of wholesale gas plummet, ministers have no excuse for not stepping in.’ Under the government guarantee, a household using a typical amount of gas and electricity in England, Wales and Scotland is paying £2,500 a year. Without state support, that annual bill would have been £4,279 since January.