ITV says Ofgem expects prices cap to be £2,800 in October, up from £1,971 now - how will we manage

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Just saw ITV talking about the Head of Ofgem writing to Rishi Sunak today to inform him the price cap is expected to be £2,800 in October, up from £1,971. That's 1k increase. It was £1,277 in October 2021. How are we and other people going to manage. Is the UK really going to hit a massive recession now? What is BofE going to do about interest rates - inflation will hit the roof. Feeling very scared about the future now

Yes, the standing charge is the elephant in the room, thwarting much of the effort that we're always being urged to make as we're berated for not switching things off.

Apparently, when the cost of electricity increased sharply, it magically also doubled the cost of having the long-existing pipes and wires in the ground....

I think I’ve worked this out correctly: The projected annual average cost from October works out as an increase of 42.06% on the current average so I suppose whatever sum you’re paying now add on 46.02% and you have an estimate of what your payments will be from October. We’re currently paying £286pcm so I think we’re looking at just over £406pcm later this year.

High inflation but wage stagnation doesnt push prices up. It just makes things less and less affordable

if you bought recently, wouldn't they have stress tested you for rate rises. I bought in 2019 and can take up to 8% interest when the time comes for me to remortgage in 2.5 years time. Also wouldn't it be quite a few years until your fixed term ends?

@89979654433g
hopefully things will have stabilised a bit by the time your deal ends and you will be okay. Try not to worry too much.
I am of the generation that has seen 15 percent rates and it happened just after we bought our first house and had our first baby. And we didnt have a fixed rate either.
It was v tough but we got through it and you will too. X

wages in London have been stagnating for years but our house prices are still at a record high. Its all the excess money looking for a home and property is seen as a good hedge against inflation. When it is time for you to remortgage, the property would be re-valued and your debt will be against the new value.

Lightbulbs can eat up huge amounts. I think the stats I read were for an average sized house with 50 bulbs, running standard bulbs would cost about £450 per year but switching everything to LED would bring that down to about £75.

Obviously it's not practical to change every bulb in the house at the same time, LED bulbs are much more expensive to buy for a start, but I'd guess that Terry Pratchet's "Boots" analogy is at work here - people with less disposable income will buy the cheaper bulbs which cost more to run and don't last as long simply because they cannot afford £5 per bulb v £1 per bulb.

Sorry - got my 2s and 6s the wrong way round. Add 42.06% to your current bill.

Well kind of. Stress tests are very much a box ticking exercise. Most people who took out first mortgages recently (rather than people who have 80k owing because they bought houses 25 years a go etc) would be properly screwed by an 8% interest rate. I’m not sure the stress test includes a sudden £200 a month increase in the price of energy or £100+ a month extra in food, £50 a month extra in petrol etc either does it?
And even if you could theoretically cope, you’d be cut to the bone.

well i guess our income has increased since then and we don't have a car (live in london). Small flat. Our main expense is the mortgage, everything else is discretionary.

Exactly and unlike years ago, wages are not keeping up. There is no way we can afford 8% but realistically our debt isn't even outrageous for London but not one designed for high interest rates. House prices in London in recent years were not designed with high interest rates in mind thats why they rose as much as they did. But that and everything else costing more is frightening.

Only add 42% on if you’re not in a fixed tariff though. If you are just on the standard rate (at the piece cap) it’d be roughly 42% more.

We are still on an old fixed tariff so pay far less than some people now it would be more like 80%+ more for us I reckon. V lucky to have that tariff for the next few months.

We are not even first time buyers so have some equity but loads of debt. Same as loads of people. But with a couple of kids, it's hard to cut down on everything

well OP, one reason why inflation is so bad is because BOE is quite slow on increasing interest rates. The government has often bent over backwards time and time again to protect the property market and it may be that they sacrifice the low income (who are less likely to have mortgages anyway) so that the middle class would be able to pay their mortgages.

'Speaking at Oesterreichische Nationalbank's Annual Economic Conference in Vienna on Monday, the BoE's governor said: “We have raised the official rate four times so far and have made clear that in order to bring inflation down to target we are prepared to do so again based on the assessment at each of our meetings.”
Bailey also warned that the cost of living crisis was hurting demand and that policy makers would take that into account when deciding how much to raise interest rates.'

@89979654433g yes I’m with you there. We also live in London and 8% interest rates would cost like I dread to think how many (many!) thousands more a month.
We were also pretty conservative and didn’t leverage ourselves to the max, overpay regularly etc but this is just how much property costs here and we need somewhere to live..

We've just paid an early repayment charge to get out of our fixed rate and get locked into another, 2% for 10 years. Genuinely worth looking into if you have approx a year left.

I agree - many people are being driven to desperate measures. Young girls choosing an OnlyFans porn career over gaining qualifications. It’s a disgrace.

The effects of a poor population are going to cost the gvmt a heck of a lot more money in the long term than it would cost to prevent the problem in the first place. So many more people reliant on benefits, going into care, into prison, into hospital. Fewer people will be able to consider higher education, or gaining post grad quals like teaching etc.

Subsidised solar panels, more wind farms, bike lanes and buses! Gvmt needs to stop relying on fossil fuels and stop forcing us to give greedy energy companies our money.

We need more alternatives.

This is a really good idea. Will look I to this later. Thank you!

Where have you got 2% for 10 years from?
I've literally just got 2.7 for 5 with a decent LTV!

Is it worth it if you have 2.5 years left?

I genuinely think this is a strong possibility especially if a recession hits and people start losing their jobs.
I think the disillusionment with our lying, corrupt leaders will add to the situation.
And if it kicks off in one country then many others will follow.
My moneys on the French to get the ball rolling.

@onthefencesitter but it doesn't make sense. High inflation tends to be about an overheating econ, here UK econ is not overheating, it's being hit by external costs. UK econ is already close to a recession. Which is why BofE hands are tied and it should be the government making difficult choices.

at 8% interest rates our monthly repayments would be £2,677 and we honestly couldnt afford that. but how many others will be like us.

You need to know what your early repayment charges would be on your current mortgage and work it out from there

@89979654433g when there is high inflation, it means that your money in the bank is losing value by 9% every year..most people regard bricks and mortar as an appreciating asset (in the long term). So they would try to find a home literally for that money. Also now that FTSE is down and so is crypto. I was talking to a developer in 2021 and he said that covid meant that governments were printing money like crazy and it would inevitably find it's way into housing.

My mortgage is £1800 at 8%. It wouldn't be easy but I have been overpaying £1k in addition to my current £1k every month for the past 2 years....if you start trying to overpay now, it will reduce your principal so hopefully by the time it comes to remortgage it would be easier.

My DM's cleaner of almost 20 years has been stealing cash from her. It's probably been going on for about 4 months. My DM is gutted as she had become a dear friend in all that time. People are going to be driven to do things that they would never have dreamt of doing to survive.