Energy price freeze announced
The average household will see their energy bills frozen at £2,500 a year until October 2024.
Energy prices for households will be frozen until October 2024, the government announced today.
The move, under which the combined gas and electricity bill for the typical household will be held at £2,500 a year, will protect people from further spiralling energy costs.
The average household is currently paying £1,971 in energy bills, but that figure was set to soar to £3,459 from October 1, while analysts had warned it could rise to more than £5,000 from January.
Today’s announcement will save the typical household just under £1,000 a year, but energy bills will still be double the level they were at the beginning of 2022.
Those who heat their home using oil, as well as people living in Park Homes or on heat networks, will receive equivalent support.
The energy price freeze was welcomed by consumer groups, but some warned that many people were already facing fuel poverty when average annual bills were at a lower rate of £1,971.
What are the details?
Under the terms of the energy price freeze, the maximum amount power companies can charge customers per unit of energy used will be capped until October 2024.
As companies are currently paying significantly more than this level for power on the wholesale markets, the difference in price will be covered by the government.
While the average household will see their bill frozen at £2,500, the actual level of bills will vary from household to household depending on how much power they use, with some paying more than this amount and some paying less.
Consumers do not have to do anything to benefit from the price freeze, as it will be automatically passed on by their supplier.
It is estimated that the scheme will cost the government around £150 billion over the two years.
How will the price freeze impact the housing market?
Soaring energy prices as a result of the conflict in Ukraine have been a major factor in pushing inflation higher.
Inflation as measured by the Consumer Prices Index – which tracks the rate at which the cost of goods and services frequently bought by consumers are increasing – hit a new 40-year high of 10.1% in July.
The Bank of England has been aggressively hiking interest rates since the end of last year in a bid to bring down inflation, which it is supposed to keep at around 2%.
Before today, there had been warnings that inflation was set to rise to 13% by October, with some economists predicting it could hit 18% or even 22% next year if the government did not take steps to tackle the energy crisis.
Today’s news means inflation is likely to peak sooner than previously expected at around 11.5% in November.
It is also good news for the housing market.
Our latest House Price Index showed that demand was beginning to cool in the face of rising mortgage rates, the cost-of-living crisis and general economic uncertainty.
The energy price freeze will provide some relief to those worried about facing a sharp rise in their bills from October, helping to support demand.
But it is unlikely to be enough to reverse the current slowdown.
What should I do if I am struggling to pay my bills?
If you are already struggling to pay your energy bills or are worried you might run into difficulties, make sure you are claiming any support that is available to you.
A number of the major energy companies offer grants to help people falling behind with their fuel bills, including British Gas, which offers up to £1,500 for individuals and families who are in energy debt regardless of who their supplier is.
In March this year, the government announced that every household would have £400 cut from their energy bills, with low-income households, pensioners and people with disabilities receiving up to £800 off.
In addition, pensioners will receive an additional £300 Cost of Living Payment, while people with disabilities will receive £150.
Support is also available through the Household Support Fund and the Warm Home Discount Scheme.
If you do fall behind, it is important to contact your supplier as soon as possible. Ofgem has rules that they must help you if you can’t afford your energy bill, and they should work with you to create an affordable payment plan.
There are also a number of steps you can take to reduce your gas and electricity consumption, such as turning your thermostat down, taking shorter showers, draft-proofing your windows and doors, not using a tumble drier and turning off appliances left on standby mode.
Key takeaways
- Energy bills will be frozen at an average of £2,500 a year until October 2024
- The move will save the typical household just under £1,000 a year, but bills will still be double the level they were at the beginning of 2022
- Those who heat their home using oil, as well as people living in Park Homes or on heat networks, will receive equivalent support
As Scotland announces a freeze on rents, will the rest of the UK follow suit?
Renters in both the public and private sectors in Scotland will be protected from eviction as part of measures designed to help with the cost of living crisis.
Rents in Scotland are set to be frozen until March 2023 as part of a package of measures to help people cope with the cost of living crisis.
The emergency legislation will apply to renters in both the public and private sectors, the Scottish Government has announced.
It is also introducing a moratorium on evictions, meaning landlords will not be able to force renters to leave their homes, even if they fall behind with their rent.
The rent freeze will be accompanied by a new tenants’ rights campaign, as well as a one-stop website that will give people information on the benefits and support that is available if they are struggling to keep up with their bills.
Campaigners are calling for a similar rent freeze and eviction ban to be introduced for renters in other parts of the UK.
Generation Rent said: “Every renter deserves certainty that they won’t be hit with further costs.”
However, there are fears that introducing a cap on private rents could force more landlords out of the rental sector, worsening the situation for renters in a market where the supply of rental homes is already strained.
UK government proposes rent cap for social housing
The UK government recently launched a consultation on introducing a cap on rent increases for people living in social housing.
However, the proposals don't include the private sector.
It is proposing limiting any rent increases on council and housing association homes to 3%, 5% or 7% from 1 April 2023 to 31 March 2024.
It estimates the move would save social housing renters around £300 a year each.
The government regulates how much social housing rents can increase by each year.
But rises are set at the rate of inflation as measured by the Consumer Prices Index plus 1%, meaning social housing renters could face increases of 11% next year without intervention.
Government plans for the private rental sector
A separate consultation has also been launched on setting a minimum standard for homes in the private rented sector for the first time.
The Decent Homes Standard would require homes in the private rented sector to be kept in a good state of repair with efficient heating and suitable facilities, while being free from serious hazards, such as major damp or fire risks.
Executive Director of Research, Richard Donnell, says: "The UK has seen a greater focus on the taxation of landlords and regulations to improve standards of housing rather than controlling rents.
"UK landlords have some of the toughest tax treatments and the Rental Reform Bill in England will improve standards of homes but also increase costs further.
"Against this regulatory backdrop, talk of possible rent controls will simply push more to exit the sector worsening the supply problem pushing rents up in the first place.
"It is important policy makers focus on the supply side problems in the rented sector in addition to the level of rents as the two are inextricably linked.
"We need to ensure policies and regulations encourage as many decent landlords as possible to remain in the market, otherwise the market will not grow and will start to decline in size, pushing rents up further."
Why is this happening?
Inflation, which measures the rate at which the cost of things increases, is currently running at a 40-year high of 10.1%.
One of the biggest increases people face is soaring gas and electricity bills.
The average household will see their combined energy bill rise from £1,277 at the beginning of the year to £3,549 from October after the energy price cap was increased, with some forecasts suggesting it could hit £5,300 in January.
Announcing the measures, First Minister Nicola Sturgeon said the magnitude of action needed to help people cope with the rising cost of living was on a scale similar to the initial response to the Covid-19 pandemic.
Who does it affect?
The rent freeze and eviction ban apply to renters in both the public and private sector until at least 31 March 2023.
The emergency legislation will take effect immediately.
But it will only help people who rent a home in Scotland. Renters in England, Wales and Northern Ireland will need to wait to see if similar legislation is introduced.
Key takeaways
- Rents in Scotland are set to be frozen until at least March 2023 as part of a package of measures to help people cope with the cost of living crisis
- The freeze will apply to renters in both the public and private sector with immediate effect
- Campaigners are calling for the rest of the UK to follow suit
What can I do if I’m struggling to pay my mortgage?
With the cost of living rising, some homeowners may find themselves struggling to meet their monthly mortgage repayments. Here’s what to do if it's happening to you.
If you’re finding you can no longer afford your mortgage repayments, there are options out there that could help you through a difficult time.
Here’s what to do if you think this might be about to happen to you.
What should I do if I think I might miss a mortgage payment?
Contact your lender as soon as possible.
Lenders will always try to work with customers who are experiencing financial difficulties.
But you’re likely to have more options if you contact your lender before you’ve missed a payment.
As soon as you think you might have a problem, get in touch with your bank or building society straight away.
How should I contact my lender?
Check your lender’s website to see how they want you to get in touch if you are experiencing financial difficulties.
Some lenders have a special helpline for people in this situation.
Most lenders will offer a variety of ways in which you can contact them in this scenario, include call hotlines, email, online chats and mobile apps.
Don’t leave contacting your lender until the last minute, as they may be experiencing a high volume of calls.
If you find yourself facing long waiting times on hotlines, try contacting your lender by email or through their website instead.
Will I lose my home?
Losing your home is most people’s worst nightmare. So, it’s good to know that repossessing a property is usually a last resort for lenders.
Instead, they will work with you to try to find a way to make your mortgage repayments affordable.
Charles Roe, Director of Mortgages at UK Finance, says:
“Lenders stand ready to help customers who may be struggling with their payments.
“It is important that anyone experiencing financial difficulty gets in touch with their lender as soon as possible to discuss the best options for them.”
What do I need when I contact my lender?
The most important things you'll need are your mortgage details and account number, so your lender can look you up on their system.
It’s also a good idea to do a budget before you make the call, so you know exactly how much you have coming in and going out each month.
And look for any areas in which you can cut back on your expenses.
Having a clear idea of what you can afford will help you as you discuss a way forward with your lender.
Can I take a mortgage payment holiday?
During the early stages of the Covid-19 pandemic, lenders introduced a mortgage payment holiday scheme.
Under the scheme borrowers could defer their mortgage payments for up to six months.
Unfortunately, the scheme has now ended, and no new official scheme has replaced it.
But lenders are still granting mortgage payment holidays to borrowers on an individual basis.
These payment holidays are typically two to three months long.
Interest that's not paid during this period is added to the outstanding mortgage debt.
What are my options if I can’t pay my mortgage?
There are four main options if you're struggling to pay your mortgage.
The best option for you will depend on your individual circumstances.
1: Extend the length of your mortgage term
The mortgage term is the total period over which you repay your mortgage.
Spreading the debt out over a longer period of time will reduce your monthly payments.
If you’re struggling to afford your mortgage due to higher bills, increasing your mortgage term could be a good option.
Increasing the period over which you repay a £200,000 mortgage from 20 to 30 years would reduce your monthly repayments from £1,019 to £744.
This calculation is based on an interest rate of 2% and a repayment period of 25 years.
The advantage of this option is that you continue to repay your mortgage.
The downside is that by increasing the term, you’ll pay more in interest over the total period of your mortgage.
2: Change to an interest-only mortgage
Changing from a repayment mortgage to an interest-only one dramatically lowers your monthly payments.
Since you’ll only be paying the interest on your loan each month, rather than paying down the actual debt, it's a much cheaper option in the short term.
If you’re going through a temporary fall in income, moving to an interest-only mortgage may be a good option as it will significantly reduce your monthly repayments.
For example, if you have a £200,000 mortgage, switching to an interest-only loan will cut your repayments from £854 to just £333 per month.
This calculation is based on an interest rate of 2% and a repayment period of 25 years.
But your lender is only likely to want to do this for a limited period, as you won't be reducing the overall amount you owe.
You’ll also still need to find a way to repay your mortgage over the longer term.
3: Defer your mortgage repayments
You can defer your mortgage and interest payments for a short period of time, typically two to three months.
After this period, the payments you missed will be added to your monthly repayments until you've made them up.
This is often done over the course of one to two years.
4: Request a payment holiday
During a payment holiday, the interest you don’t pay during the holiday will be added to the overall amount that you owe.
A mortgage payment holiday may be a good option if you have seen a sharp drop in your income or been made redundant.
The holiday will give you breathing space of two to three months in which to get back on your feet.
But lenders are unlikely to offer you a holiday for longer than this.
They will also want to be confident that you'll be able to resume repayments once the holiday ends.
The payments you have missed will still need to be made up at a later stage.
If I take out any of these options, will I have to pay any fees or penalties?
No, lenders understand that if you are facing financial difficulties, the last thing you need is extra fees or penalties.
As a result, you won’t face any charges to change to a plan agreed with your lender.
But you may face penalties if you miss a mortgage payment without contacting your lender.
So be sure to keep them up to date with your circumstances.
Are these options open to everyone?
Lenders want to work with you to help you avoid losing your home.
They will try to find an option that works for you even if you've lost your job, or have a poor credit history.
That said, they'll want to feel confident that you can keep up with your repayments over the longer term.
They won't want you to get so far behind with your payments that you can't catch up with them.
Will it impact my credit score?
Unfortunately, taking out a mortgage payment holiday may impact your credit score.
This is nothing to do with mortgage lenders. Instead, credit reference agencies will spot that you have not made a monthly repayment that you were scheduled to make.
This may make it harder to borrow money over the short term. But there are steps you can take to improve your credit score once you get your finances back on track.
Key takeaways
- First things first, if you’re finding it hard to pay your mortgage, contact your lender. Don’t be afraid, lenders will work with you to find a solution
- Options may include a mortgage holiday, changing to an interest-only loan, or increasing your mortgage term
- If you think you might miss a payment, contact your lender as soon as possible before it happens, as they'll be in a better position to help
First-time buyers have just two months left to use the Help to Buy equity loan scheme
The government’s flagship initiative to help people get on to the property ladder will close to new applications on 31 October.
First-time buyers have just two months left to use the Help to Buy equity loan scheme before it closes to new applicants.
The flagship initiative to help people get on to the property ladder will stop accepting new applications at 6pm on 31 October, before closing completely on 31 March 2023.
The scheme enables people to purchase a new build property with just a 5% deposit. The government then tops this up with a 20% equity loan, rising to 40% in London, that is interest free for the first five years.
Since it was first launched in 2013, more than 350,000 people have used the Help to Buy equity loan to purchase a home.
What does the deadline mean?
Because the Help to Buy equity loan only applies to new build properties, the scheme effectively has two deadlines.
This is because new build properties are typically sold off plan and then have to be built.
As a result, the first deadline of 6pm on 31 October is the date by which you must apply to the Help to Buy equity loan scheme, having agreed to purchase a home off plan.
In practice, this means submitting your Property Information Form to your Help to Buy agent by this date.
The second deadline of 6pm on 31 March 2023 is the date by which you must have legally completed on your home, meaning you must have the keys and be able to move in.
If you don’t complete by this date, you will not be eligible for the equity loan.
There is also a third deadline you need to know about.
The builder must have finished building your home so that it is ready to live in by 31 December 2022. This is known as the practical completion.
If you plan to use the scheme, it is important to check with your housebuilder and solicitor that you will be able to meet all of these deadlines.
Why is this happening?
Help to Buy equity loan was only ever intended to be temporary scheme.
When the government announced plans for the second phase of the initiative, which included limiting it to first-time buyers and introducing regional price caps, it made it clear it would run from 1 April 2021 to 31 March 2023.
There are currently no plans to extend or replace it.
What other help is available?
The good news is that while Help to Buy equity loan may be ending, there are still a number of government schemes available to help both first-time buyers and those trading up the housing ladder.
- Both first-time buyers and home-movers who have only a 5% deposit can use the mortgage guarantee scheme to borrow 95% of their home’s value.
- Meanwhile, First Homes, helps first-time buyers, key workers and local people to purchase a home at a 30% discount to its market price.
- And Shared Ownership enables people to buy a share in a property and pay rent on the rest.
- First-time buyers saving for a deposit can also use the Lifetime ISA, under which you can save £4,000 a year. The government then adds a 25% bonus - up to a maximum of £1,000 annually - for free. The money must be used to either purchase a first home or for retirement.
Key takeaways
- The Help to Buy equity loan scheme will stop accepting new applications at 6pm on 31 October, before closing completely on 31 March 2023
- The initiative enables first-time buyers to purchase a new build property with just a 5% deposit
- There are still a number of government schemes available to help both first-time buyers and those trading up the housing ladder