Bills go through roof as festive debts hit home
BRITONS are suffering from the financial chills as soaring energy costs and motor insurance premiums add hundreds of pounds to household spending.
The average household is paying £285 more on these two essential bills than they were just one year ago, and as much as £500 in some parts of the country, according to shock new figures from CompareTheMarket.com.
As the nation shivers in the icy winter weather, it is the sharp increase in gas and electricity bills that will hurt most.
Home energy charges leapt an astonishing 14 per cent last year, or 4.5 times the consumer price inflation rate of 3.1 per cent.
The average household energy bill increased by £241 from £1,384 to an astonishing £1,625, leaving many frightened to turn on the heating despite the winter cold.
Adding to the pressure on the nation’s wallets, motor insurance premiums have been driven upwards by a combination of stealth taxes and a new method of calculating personal injury compensation payouts. STEALTH ATTACK Former Chancellor George Osborne and his successor Philip Hammond have been using motorists as cash cows for the Treasury, doubling the rate of insurance premium tax (IPT) from six to 12 per cent over the last two years.
This has also pushed up the cost of household, pet and private medical insurance, costing some families hundreds of pounds. The average motorist now pays a whopping £735 for comprehensive cover, up from £692 one year ago. This compares to £595 as recently as 2015.
The average household now spends £2,502 a year on just three bills, home energy, motor and household insurance, up from £2,216 last year.
CompareTheMarket director Simon McCulloch said this marks a torrid three years for household finances, with wages currently growing at just 2.2 per cent a year: “The combination of soaring bills and squeezed wages is causing pain for millions.”
The big six energy firms recently announced plans to scrap their costly standard variable tariffs, but this has had little effect so far, McCulloch said: “Millions are still languishing on expensive default tariffs, which may account for the fact that energy costs are at a record high. However, consumers can save around £500 on their household bills by shopping around for the best deal.” FINANCIAL HEADACHE The financial chill could not have come at a worse time as Britain wakes up to its annual New Year debt hangover.
Rachel Springall, finance expert at MoneyFacts.co.uk, warned that even a small debt of £300 could incur major charges, particularly on an unarranged overdraft. Its figures show that somebody going £300 overdrawn for 15 days in a month could pay £90 on an unarranged overdraft charging £6 a day. “Charges would total £270 if you did not clear the debt for three months,” she said.
However, by setting up an arranged overdraft you could reduce charges to £1 a day, reducing the penalty to £15 over one month or £45 over three.
Consider consolidating larger debts via a personal loan, which charges an average 4.6 per cent for £10,000 over five years. Springall added: “Best buy loans charge as little as 3 per cent, provided you pass credit checks, so shop around.” DEBT RELIEF Samantha Seaton, chief executive of Moneyhub Enterprise, said as the squeeze on household incomes intensifies be sure you are getting the best deal on all your essentials, including water, broadband, mobile phone, subscription TV, loans or credit cards. “If paying over the odds, be ready to move on.”
If your spending is running out of control, Seaton suggests contacting advisory services such as the National Debtline, the Money Advice Service, StepChange and Citizens Advice, which offer free debt advice: “Some can even contact the credit providers on your behalf to set up a payment plan that works for both of you.”