It has been another rollercoaster year for millions of households when it comes to their finances.

Take inflation, which has come down from its punishing highs but continues to hammer family budgets. And while many bills are not rising as fast now as at the start of the year, barely any have gone into reverse.

And the increases seen this year add to the misery already inflicted during the cost of living crisis. Here we examine what elements of household finances have gone up, which are coming down, and what the prospects for each heading into the new year.

Inflation

Inflation in the UK peaked at a budget-busting 11.1% in October 2022, the highest in over 40 years. But the surge began to ease in 2023 and by the start of 2024 the consumer prices index measure of living costs was down to 4%.

Within even that, some of the things that families buy most often continued to soar. The average price of food and drink, was instance, started the year rising at a rate of 8%, while clothing and footwear remained over 6% more expensive than the prior January.

Fast forward to now and inflation stood at 2.3% in October – with the Office for National Statistics due to give an update on Wednesday. To show we are not out of the woods, the rate was up sharply from 1.7% in September, driven by higher energy bills.

Experts are split on what happens to inflation next year, with some forecasting upward pressure from April’s changes to employers’ national insurance, which could feed through to price rises. The Bank of England thinks it is likely to edge up to about 2.75% in the second half of next year before falling again.

Wages

Easing inflation has come amid a rise in earnings, theoretically leaving families with more money to spare.

Average regular pay – excluding bonuses – rose by 4.8% between July to September, according to the Office for National Statistics. In real terms, so adjusted for inflation, regular pay stood at 1.9%.

What happens to pay could depend on the health of the jobs market, and the willingness – or otherwise – for employers to fund increases. Feedback to the Bank of England suggests firms are expecting to dish out pay awards in 2025 in the range of around 2% to 4%.

But lower paid staff are set to get a bigger increase given the government announced rise in the National Living Wage from April. The rate for those aged 21 and over will go up by 6.7% to £12.21 per hour, to £10 for 18 to 20 year-olds, £7.55 for under 18s and the same for apprentices.

Shop prices

The cost of goods in shops, like the wider measure of inflation, has eased backed as the year progressed.

According to trade body the British Retail Consortium (BRC), shop price inflation was 2.9% in January, down from 4.3% in December. Within that, food prices were still rising by 6.1% on its measure.

So much has changed that, using the average across all products, prices in shops are now in deflation – so falling year-on-year. The BRC put deflation at 0.6% in November, albeit up from deflation of 0.8% in the previous month. The drop into negative territory was driven by non-food products, where prices fell by an average 1.8% last month.

The outlook for next year can always be hard to predict, given retailers have so many cost pressures. But many have flagged the impact of higher national insurance contributions in warning they may have to increase prices.

House prices

Property prices began the year muted but picked up as the year progressed.

According to mortgage lender Halifax, average house prices increased by 1.3% in November, a fifth consecutive monthly increase. A fresh update from rival the Nationwide building society predicts house prices will grow in the range of 2% to 4% in 2025.

Robert Gardner, the Nationwide’s chief economist, said: “Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”

Water

The average water bill is expected to rise by 6% in England and Wales, up from £445 to £473 each year, according to industry body Water UK. That amounted to a near 2% above inflation rise for millions of households.

It comes amid rising concerns about the impact, on top of other bill increase, on many households, leading campaigners to warn of “water poverty”.

Increases for next April will be announced later this week by regulator Ofwat. In July, Ofwat proposed that water bills in England and Wales increase by an average of 21% over five years, or £19 per year.

Energy bills

Sky high energy bills have been one of the painful bills for very many households this year.

Regulator Ofgem’s price cap for 27 million households still stood at £1,928 per year in January to March. The cap for next January to March is £1,738 per year for a typical household paying by direct debit

And industry expert Cornwall Insight predicts a rise to £1,762 a year when the cap is updated in April.

Mortgage rates

The spike in mortgage rates has – along with food and energy – had the biggest financial impact for many households.

The largest shock has been for borrowers coming off cheap fixed rate deals that were taken out five or so years ago, when they have to remortgage. Fixed rate mortgages for new borrowers have begun to ease, with the best buy deals heading back towards 4%.

What happens next year will depend in part on the path of interest rate cuts from the Bank of England. The Bank’s base rate is currently 4.75%, with experts predicting it will be frozen again this week. But the best guess from economists is that there could be four rate cuts on the cards next week. That said, much will depend on factors ranging from the strength of the economy to wages and price rises.

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