UK inflation rose to 2.9% in July, up from 2.6% in June, marking its highest level since March. The increase was widely expected after energy bills jumped by 13% in July.
Energy Bills: Fixed Deals and Winter Prep
Energy analysts at Cornwall Insight expect another 4% jump in the Ofgem price cap from October, following the 13% increase in July. However, experts at Uswitch.com say households can save by switching to a fixed energy deal, with the best deals currently undercutting the latest price cap prediction by around 12%.
Richard Neudegg, director of regulation at Uswitch.com, said: “Don’t suffer higher winter bills when you don’t have to – a decent fixed tariff beats these rates and protects you from further price rises. Every week spent on a standard tariff is another week paying higher rates than you need to.”
Other savings include sealing drafts, bleeding radiators, and checking eligibility for Winter Fuel Payments (worth up to £300 for those over state pension age) or the Warm Home Discount (£150 off electricity bills for certain benefit claimants).
Savings: Beating Inflation and Tax Implications
Around four in five savings accounts still pay above inflation, according to Moneyfacts. Its analysis shows 1,850 savings accounts currently beat inflation. The top-paying easy-access account offers 5%, meaning £10,000 saved for one year would accrue £500 in interest, with real gains after inflation of £210.
Caitlyn Eastell, Personal Finance Analyst at Moneyfacts, said: "For savers, beating inflation is the difference between simply earning interest and increasing the spending power of their money. While a balance can be growing on paper, it could be shrinking in value if the savings rate fails to keep pace with rising prices."
Basic-rate taxpayers can earn up to £1,000 in savings interest each tax year before paying tax, while higher-rate taxpayers can earn up to £500. Additional rate taxpayers receive no allowance. Eastell added: "Higher-rate taxpayer can use up their £500 Personal Savings Allowance with just £10,000 earning 5%, meaning any further interest could become taxable. Despite their slightly lower rates, this is where ISAs could become particularly valuable."
Mortgage Rates: Remortgaging and Advice
Mortgage rates have risen since the start of the Iran war, though lenders have reversed some increases recently. Experts say the market remains volatile, making it "impossible to rule out more yo-yoing" in rates.
If your mortgage is expiring, remortgaging to a cheaper deal can save money. You can lock into a new fixed deal three to six months before expiry. Use online comparison tools or speak to a mortgage broker, and ask your current lender about product transfers.
David Hollingworth, associate director at L&C Mortgages, said: “The good news is that, because today’s increase in inflation was widely anticipated, it’s less likely for there to be big repercussions in markets that would put more pressure on lenders funding costs in the short term. For anyone considering a purchase or remortgage, securing advice early remains important."
Mobile, Broadband, Water, and Food Savings
For mobile and broadband, if out of contract, compare prices via comparison websites and ask your provider for a better deal. Sarah Coles, head of personal finance at AJ Bell, said: "Broadband and media deals can be switched, or you may be able to call your provider and negotiate a better deal just by threatening to quit."
Water bills are set to rise after five water companies, including Thames Water, were provisionally allowed to hike costs. Ofwat previously allowed water firms to raise average bills by £157 (roughly 36%) by 2030. While you can't switch providers, every water company has a social tariff for low-income customers. Last year, almost two million households received support, with bills reduced by an average of £190. Sebrina McCullough, director of external relations at Money Wellness, said: "The rules are different depending on which water company you're with, so it's worth checking rather than assuming you won't qualify."
Food inflation fell to 1.2% in July, the lowest since September 2021. However, food producers warned that soaring temperatures and droughts could drive prices higher. Dr Liliana Danila, chief economist at the Food and Drink Federation, said: "Competition for fewer resources will in turn push up the price of ingredients for manufacturers. ... we expect the additional upward pressure of reduced crops will be reflected in retail prices into next year." To save, use yellow stickers, try the Downshift Challenge (swapping branded goods for supermarket-own, saving around 30%), compare prices via Trolley.co.uk, write a shopping list, and freeze food.
Train Tickets: Potential Price Rise and Savings
Train passengers face a potential 4.2% increase in ticket prices next year, based on the Retail Price Index (RPI) measure of inflation for July, which was 3.2%. Last year, rail increases were measured based on RPI plus one percentage point. The Government has not confirmed whether prices will rise next year. Regulated train fares did not go up this year after former Chancellor Rachel Reeves announced a price freeze.
To save, book cheap advance tickets about 12 weeks ahead, use split ticketing, or buy a railcard (saving 30% to 50%). Catherine Lyver from Railcard.co.uk said: "Brits are proving that saving money doesn't mean missing out. For many, the money saved with a Railcard becomes the ice cream, coffee or extra treat that makes a day out feel special."
