Take action now to avoid big bills

AS the price of gas soars, putting small suppliers out of business, the UK is facing an energy crisis.

Ultimately, it will mean we all face bigger energy bills – but this is only part of the problem.

Soaring energy bills will also lead to rising inflation and interest rates, meaning the price of everyday goods and services will rise.

However, potential increases to energy and mortgage costs will hit your pocket the hardest, so you should take action now to protect yourself over the winter.

Your energy bills

From October 1, energy bills are set to increase by anything from 12 to 43%. My advice is that if you are not already on a “standard variable tariff”, moving to this with your current supplier may save you money.

This tariff is protected by Ofgem’s price cap and many of the price comparison sites say there are very few tariffs cheaper than the cap. Alternatively, you could find the cheapest one or two-year fixed deal. This should help shield you against price inflation over the coming months.

Your mortgage

The Bank of England aims to keep inflation at 2%. But the National Institute of Economic and Social Research group has reported it could hit 3.9% early next year – almost double the Bank of England’s target. The main tool at its disposal to keep control of this is interest rates. If inflation rises too steeply, an increase in interest rates can be used to counter it.

While no increase has been publicly mooted at present, my view is that one will be is inevitable within the next six months.

If you have a variable or tracker mortgage, where anything you pay is directly linked to the base rate, any interest rate rises will mean your payments will increase. To put this into perspective, even if the rate increases by as little as 0.25%, your repayments could still shoot up by hundreds of pounds a year. However, if you have a fixed rate mortgage, any inflation changes will not impact your payments.

If you are not already on a fixed deal, my advice is that it is now time to shop around to see if you can get a deal.

At present, good deals are still available but they will disappear if interest rates are increased.