It’s been a tumultuous few weeks for people around the UK. But as things start to return to normal, we face a barrage of delayed news, cost-of-living crisis plans and announcements that will have a direct impact on how much money we will have in the coming months and years.

Here is my overview of the big dates on the horizon and what the impact might be on your finances.

Bank of England interest rate – 22 September 2022

Delayed by a week but destined to have a major impact on millions of people, on 22 September, the Bank of England will meet to announce whether the interest rate will increase. The experts and economists I’ve spoken to are suggesting an increase of 0.5% from the current Bank of England rate of 1.75%, though some are indicating we could see the rate hit as high as 2.5% in total.

This is bad news for people who have borrowed money, from credit cards to mortgages. Mortgage payments are the biggest concern for most people. In fact, many people have contacted me to say that they are paying exit fees to leave their current deals earlier because it’s more cost-effective to fix a better deal now.

For those concerned about affordability, there are a range of options (though none are easy), from extending the term of your mortgage to reduce monthly payments to downsizing. Don’t panic and rush in to making a dramatic decision though. Lenders don’t want you to ‘go under’ and should talk you through all the options depending on your financial situation. A good mortgage broker can help you navigate the increasingly complicated world of options that are on the market at the moment too. [Link to Jo’s column]

If you have outstanding debts or an overdraft, it makes sense to focus your energies on reducing these bills as a priority as they’re more expensive long-term. Overdrafts are now chargeable for simply using the facility – and the way the charges are calculated are ludicrously complicated and opaque. If you’re stuck in your overdraft and can’t get out of it, call your bank and see if you can cancel the overdraft and remove the outstanding debt by transferring it in to an interest-free loan. You may have to give some details of your financial situation to do this though.

Credit card interest rates are reaching levels not seen for years. However, there are options for people who are worried they won’t be able to pay the debt at the higher interest rate. Under the Consumer Credit Act, lenders must give you 30 days’ notice before the price increase occurs. You then have 60 days to ‘reject’ the rate if you are unhappy. This triggers a process where the card provider should allow you to pay back the money in a ‘reasonable’ amount of time and at a realistic rate. Make sure you ask about any impact on your credit file.

One hint of good news. Savings accounts are finally starting to reflect the increase in the BoE rate of interest, though the major banks aren’t exactly offering great returns. Have a look online at the comparison sites to find the best rates. You’ll see many online banks are offering great ‘notice account’ rates – where you have to give a set amount of notice (from seven days to years) to withdraw your cash without penalty. Look at UK-based lenders who are members of the Financial Services Compensation Scheme (FSCS) which protects your savings up to £85,000.

Times Money Mentor will be tackling housing in our cost-of-living special newsletter and columns this week.

The ‘mini-budget’ and energy plans for smaller businesses – 23 September 2022

This Friday we can expect the Government’s latest financial proposals, now being billed as a ‘mini-budget, from Chancellor Kwasi Kwarteng. Budgets usually appear in late October, so we don’t know if this announcement will replace that one or is something of a stop-gap after the recent leadership competition. We know from the campaigning over the past month that tax cuts and economy stimulation measures are likely to feature, with suggestions that they cuts will be introduced in November.

Tax cuts have proved to be a controversial method for tackling the cost-of-living crisis, as by their nature the money you gain is proportional to the money you have coming in. So the amount you will benefit from in real terms is solely based on the level of money you earn. It’s possible that the previous 1.25% increase in National Insurance (NI) payments will be reversed, but for most people, the benefits are limited.

According to research conduced by the Times, the poorest three million households in the UK will only be better off by 63p a month, while those earning over £100,000 will benefit the most. Other mooted tax cuts include trimming income tax (reputedly by 1p) and even basic rate income tax (by 2p). Corporation tax levels are also rumoured to be frozen.

The Government argument is that this will ultimately stimulate the economy through trickle-down economics, the Reaganite principle that tax cuts and investment packages for the wealthier will find their way down to everyone in the end. There is much conjecture about whether this ever worked in practice though – and we’ll see how the reported lifting of the cap on bankers’ bonuses lands with the public…

It’s possible this week will also bring further details about the Government support package for small to medium businesses with their energy consumption.

‘Shocktober’ and support packages – October onwards

Many people have been dreading the arrival of October, ever since dire warnings of energy bill rises reaching record levels began to sound at the start of the year. On 01 October 2022, the new Government ‘Energy Price Guarantee’ which fixes a cap of on average £2,500 for energy bills will be introduced, though actual bills will be based on your energy consumption. Even people on fixed tariffs are likely to find that they come under some pressure to increase their monthly direct debits to avoid ‘bill shock’. This is the big price hike you experience when your fixed deal ends and your bill rises to a much higher level to accommodate the current price and your energy usage.

Of course, with temperatures already dropping, October is the time we tend to turn on the heating as well, compounding the problem. Many people have contacted me about the best way to save cash by using home devices less. While savings can be made, the sums aren’t huge in the big scheme of things. You can find more about energy consumption and savings at the Energy Saving Trust. However, you’ll save more cash by following Time Money Mentor’s guides to saving money by switching other contracts and regular payments [link].

There are a range of Government grants and rebates that are currently underway or pending for people in receipt of certain benefits or tax credits. However, we should all start receiving the ‘Energy Bills Support Scheme’ payments from October too. This £400 payment will be allocated to your bills automatically in six chunks, with £66 in October and November and £67 for the remaining four months. How you’ll get the money depends on how you pay – and there are a number of people who fall through the gaps in the current plans. Speak to your energy company if you’re not sure if how you’ll receive the money, though for most people their direct debits will reduce or credit will be added to their prepayment meters.

Strike action – October onwards

Strike action was briefly suspended while during the period of national mourning after the death of the Queen. However, it’s a temporary respite as everyone from Post Office staff to barristers will resume strike action soon.

It’s on the trains where the biggest impact will be felt. Twelve train companies have announced strikes on 01 October and 05 October. The action will affect some major events, from the Conservative Party Conference to the London Marathon. This is coupled with ongoing problems on Avanti West Coast where people are still reporting being unable to book trains due a severely reduced timetable.

There will also be a 48-hour walkout that will affect the Royal Mail on 30 September and 01 October which will have a significant effect on postal deliveries.

Strike action has two types of impact. Direct – when you’ve paid for goods or services that aren’t provided and indirect, where you lose out as a result on other goods or services because of the impact of the strike. Refunds for things like train tickets should be relatively straightforward, though don’t assume they will be automatic, either for single tickets or season tickets. However, indirect losses – like not being able to get to gigs or events or use hotel bookings – are less clear cut. You may have to negotiate for things like refunds or be prepared to compromise if the strike is not the fault of the business.

To the end of the year

I’m not saying out loud, but a certain event in December has a dramatic impact on our finances in the last few months of the year. Given the cost-of-living crisis, most of the retailers I speak to are telling me they expect this to be one of the lowest spending festive seasons they’ll ever see. If you are budgeting for the big day, then bear in mind that many of the ‘big ticket’ items will be in much scarcer demand this year. This is because of the ongoing impact of the pandemic when production reduced dramatically, coupled with ongoing supply chain issues and demand for certain electrical components and batteries affecting everything from cars to e-watches. If you’re doing one big present for your loved ones this year, then now is the time to start looking.

I’ll be honest. It’s not looking like the remainder of the year will be filled with good news, with some predictions indicating another big hike in the Bank of England interest rate and inflation increasing. But volatile times mean predictions are hard to make definitively – and things can change for the better. I’ll be keeping you updated on the news as we have it and Times Money Mentor will be bringing you all the advice and support you need to get through the year ahead.

Featured in Times Money Mentor – Martyn James

Five things to watch out for: interest rate rise, mini-budget & more

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