Over the course of 2022, the cost-of-living crisis is something that many of us were all too aware of. The exact figures changed so much throughout the year that it can be difficult to see where 2022 stood in comparison to 2021.
So, what has caused the cost-of-living rise, and what are the exact figures?
Why Has the Cost of Living Gone Up?
Cost of living is increasing due to inflation, which in large part is due to the economic recovery from the Covid-19 pandemic. Most central banks see a target rate of inflation of 2% as a good thing, but we’ve experienced much higher. Consequently, people’s wages are not increasing at the same rate, so are being left worse off.
In August 2022, the rate of UK inflation remained more than three times higher than August 2021, which was five times higher than the official 2% target.
The Cost of Living UK 2022
Housing
The rental market was a huge contributor to the cost-of-living crisis in recent years. The demand for housing exceeded the supply, therefore skyrocketing prices to figures that young people (who are more likely to rent) can barely afford. This issue is particularly prevalent in major cities.
Over one quarter of the UK’s domestic spending goes on housing. Health and education, by comparison, are the lowest spends in thanks majorly to the NHS and public schooling system.
But the high spending doesn’t stop at the housing itself; general household spending in the first quarter of 2022 stood at 12.6% higher than it did during the same period of the previous year. Overall, at-home costs are one of the highest expenditures for UK households.
Food
Alongside housing, the price of food is one of the areas that has been hit the hardest by the cost-of-living UK increase. Between April 2021 and April 2022, for example, the average cost of a 500g bag of pasta increased by over 50%.
This is because the cost of production rises with inflation. There’s a catch-22 effect on a rising cost of food making famers and food producers demand more pay, which makes food more expensive to buy from them.
Unfortunately, this cost tends to get added on to the final cost of the product, so that consumers pay for it rather than the retailer.
Bills
Perhaps even more so than housing and food, energy prices have had a major effect on most of us. Over the last year, electricity prices have increased by 54%, whereas gas has risen by 96%. The latter was largely due to a higher demand for gas after Covid-19, and the conflict in Ukraine.
In the first quarter of 2023, low-income UK households should expect to pay an extra £418 to cover their energy bills compared to the same period in 2022. The richest 10%, however, will likely only see an approximate increase of £560.
How Can Managing Property Help Your Finances?
The rise in cost of living has many of us reconsidering our big payments. Fortunately, there are several ways that you can cut down on your spending in 2023 by considering how you rent or mortgage your property.
Remortgaging
Remortgaging is a great way to get yourself a better deal on your mortgage, helping you to save yourself a fair bit of money in the long term. By remortgaging, you’re essentially taking your existing mortgage and moving it to a different package with the same lender, or a different lender, in order to reap the rewards associated with a new mortgage.
There are many reasons why you may wish to remortgage your home, including to:
• Reduce your monthly payments
• Find better rates on a new deal
• Refix at the end of your existing deal
• Switch to fixed, variable or capped rate mortgages
• Change to a more flexible mortgage
• Release equity in your home
Wondering how to remortgage your house? Our conveyancing experts can help.
Equity Release
Equity release is a form of mortgage available to those aged 55 and over. If you bought your property several years ago, you’re likely to have seen its value increase, but you’re also likely to have decreased your mortgage during this time. The difference between the two amounts is known as your property’s equity.
With an equity release plan, you can access the equity money that’s tied up in your mortgage. It’s much simpler than taking out a traditional mortgage as your lender won’t need to consider your outgoing payments or income.
The main downside of an equity release plan is that it’ll likely decrease the value of your property, particularly if you choose the option of not making monthly repayments. However, it is an extra source of money to obtain however you like. For example, you could take an initial lump sum followed by smaller future amounts, or treat it as a regular monthly income.
This money can be used however you like once it’s taken out; it’s no longer tied up in your property. You can talk to our experts to find out if you’re eligible for an equity release mortgage, and if it’s right for you.
How Howells Can Help
You can find out how inflation is affecting you personally with the Office for National Statistics’ inflation calculator.
At Howells, we can help with remortgaging, buy-to-let, and other living arrangement agreements that could be affected by rising cost-of-living prices. Get in touch with our residential conveyancing experts to find out more about any of the above.
