Household budgets are being stretched to the limit every month by sky-rocketing bills.
According to the latest statistics, food is 9% more expensive than a year ago, short term fixed rate mortgage costs are at a ten year high, and energy prices could rise by as much as 40% before year end.
Clearly it’s time to start tightening those belts. But before you start cutting back on the things you enjoy in order to stay afloat, why not take a few minutes to see how much fat you can trim from those pesky bills first?
We looked at five of the most common household outlays and found that you could save up to £1,969 a year simply by switching to the best possible deal on the market in each instance.
Bill #1: The mortgage
It is most household’s biggest monthly outlay, so let’s start with the dreaded mortgage.
Nowhere else can the impact of the credit crunch be more clearly seen than in the mortgage space. With lenders fast pulling their best offers from the market and rates rising on a weekly basis (Halifax has announced 19 hikes in the last six months) hunting for a decent mortgage is a pretty thankless task at the moment.
Certainly there’s no getting around the fact that you will have to pay notably more than you would have a year ago. So, you may be wondering, why even bother searching for a new deal when your current one expires? Unattractive as they may be, they’re still a much, much cheaper option than languishing on your lenders standard variable rate (SVR).
Consider the following example: You have a £150,000 mortgage with Halifax, and your fixed-rate deal is about to expire. Rather than revert to the SVR, you sign up to a five year fix with the same lender, which comes with a £999 fee and a 6.09% rate. Do this and your average annual cost over that period will be £11,896.
Had you simply stayed on your lender’s SVR of 7%, your annual costs would have been £12,720, - that’s £824 more.
As a final note, it may be tempting to hold off from locking into a new mortgage deal in the hopes that sky-high lending costs will finally taper off. This would likely prove a terrible mistake, as many analysts are predicting that mortgage rates will continue to rise for at least the remainder of the year.
Annual saving: £824
Bill #2: The gas bill
If the worst case scenario that analysts are predicting becomes a reality, the average household will be paying nearly £1,500 a year for their energy.
Switching to a cheaper supplier is obviously recommendable, but with the ‘big six’ players changing their prices on an almost weekly basis, it’s unlikely you’ll end up significantly better off in the long run (read more about this here).
The best way to achieve a lasting reduction in your energy bills is to switch to an online tariff and pay by direct debit. Research shows that this simple change could save you as much as £187.
Annual saving: £187
Bill #3: The plastic
If you have existing debt on your credit cards it’s essential you switch your debt to one of the numerous 0% balance transfer cards on the market. Sadly, most of us are failing to do so – the British Bankers’ Association found that 73.6% of all credit card balances are currently bearing interest.
With the average APR on credit cards now an astonishing 17.6%, we are racking up millions of pounds in interest unnecessarily.
The best balance transfer card on the market is still the Virgin credit card, which offers 15 months interest free, with a 2.98% admin fee. Assuming you have £2,500 debt and pay it off within the 0% window, you will have saved £230 in interest.
Annual saving: £230
Bill #4: The PPI
If you are about to apply for a loan for which you’d like to add payment protection insurance (PPI), make absolutely sure you shop around for the cheapest cover.
Simply allowing your lender to tack their PPI on a loan is prohibitively expensive – so much so that the Competition Commission is even considering banning it outright – while standalone PPI providers are generally much cheaper.
As an illustration, the Royal Bank of Scotland will charge you £2,768 for PPI on a £10,000 loan over four years, but British Insurance will cover the same loan for just £553 – a saving of £2,215 over the four years.
Annual saving: £554
Bill #5: Broadband
Like any technology, broadband is getting faster and cheaper all the time. So even though you took the time to shop around for the best broadband deal a year or two ago, you are almost certainly paying more than you need to.
A couple of years ago, a 2Mb line with a 40GB download limit cost as much as £27 a month, but you can now get an 8Mb line with an unlimited download limit for as little as £12.50 – that’s an annual saving of £174, plus you’re getting a better package out the deal.
Compare broadband deals in your area now.
Annual saving: £174
