Tips to help your family cope with inflation

Tips to help your family cope with inflation


Inflation is rising at its fastest level in six years, so follow our advice to beat the great squeeze. By Niki Chesworth

Family finances are being squeezed from all sides as inflation is rising at its fastest level in six years, according to official figures.

The Retail Prices Index (RPI) rose by 4.2 per cent over the last year but there have been even bigger hikes in electricity and food prices – up by 8 per cent and 7 per cent respectively – and petrol prices which are 19 per cent higher.

1. HOUSING
The credit crunch has hit the mortgage market but there are a few green shoots. The Nationwide, for example, trimmed fixed rate mortgages by as much as 0.3 per cent last week in response to the Bank of England's £50bn cash injection to the banking system. Abbey, meanwhile, reduced its flexible and tracker rates by 0.05 per cent last week in addition to cutting some of its fixed rates by up to 0.17 per cent. As the mortgage is likely to be the biggest family bill, switching to get a better rate should be a priority.
Inflation-buster : Anyone on a variable rate mortgage has probably not benefited from the 0.75 per cent cut in Bank of England base rates since November, as lenders are not passing on rate reductions in full. Switch a 25-year £150,000 repayment loan from 6.5 per cent to 5.84 per cent and save around £732 a year. If money is really tight switch to interest-only on a temporary basis – saving a further £2,000 a year.

2. ENERGY
Further price rises are to come after British Gas warned this week of sharp increases in wholesale fuel prices. Some analysts forecast the average energy bill could rise by as much as 46 per cent this year hitting £1,327.
Inflation-busters: Some 4m households have never switched utility company from the original local monopoly supplier – even though the average family of four could save around £200 a year. Of the eight in 10 that have switched, many could benefit from changing again. Pay by direct debt, manage the account online and opt for duel-fuel for the biggest savings. Visit www.energywatch.org.uk or www.uswitch.com. Increase energy savings by a further £250 a year by following the tips at www.energysavingtrust.org.uk.

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