Latest information on the cost of living crisis as it affects households and individuals across the UK
13 June: Lending Lowest Since Onset Of Pandemic In 2020
Data published today by the Bank of England and the Financial Conduct Authority shows that mortgage lending is down by 24% compared to a year ago.
Gross advances in the first quarter of 2023 stood at £58.8 billion, down from £76.9 billion in Q1 of 2022 and £81.7 billion in the previous quarter. Lending is at its the lowest level seen since the start of the pandemic in 2020.
The value of new mortgage lending – loans agreed to be advanced in the coming months – was 16.1% down in the first quarter of this year and 40.7% less than a year ago, at £48.9 billion. This was also the lowest recorded level since the second quarter of 2020.
The data shows that mortgage arrears have risen as rates and the general cost of living have soared over the past year. The value of outstanding mortgage balances with arrears increased by 9.5% in the first quarter of 2023 and 12.5% over 12 months, to £14.9 billion.
Jeremy Leaf, north London estate agent, remains positive: “Recent volatility in the mortgage and property markets makes these figures particularly interesting. Although comparisons with the busy period 12 months ago can be misleading, they still show that buyers are proceeding cautiously, despite improvements in activity on the ground since the beginning of the year.
“Provided mortgage deals are left on the table and interest rates don’t keep rising, then stability will return as the market is still being supported by strong employment numbers and better-than-expected salaries.”
You can catch up on the latest mortgage news here.
12 June: Plugging National Insurance Gaps Could Boost Entitlement
Thanks to a near two-year deadline extension announced today, taxpayers have until 5 April 2025 to plug gaps in their National Insurance contribution records from 2006 to 2016, potentially increasing their state pension entitlements, writes Andrew Michael.
The period 2006 and 2016 was a transitional period coinciding with the move from a previous state pension arrangement to the present one. The government originally imposed a deadline of 31 July 2023 for those looking to top-up their contributions for these years.
NICs are a means of taxing earnings and self-employed profits. Paying is a legal obligation, and those who do so also earn the right to receive certain social security benefits.
However, not everyone manages to keep up with a full set of NI payments, often because of a career break, potentially lowering the amount in benefits to which they are entitled.
This includes the amount received under the post-2016 state pension, which currently stands at £203.85 a week.
To make up for this, the government allows people to fill the gaps in their NI history by topping-up missed contributions. Making voluntary contributions can leave individuals significantly better off in retirement than not doing so.
Rates vary for different classes of NIC, payable according to employment/self-employment status. They currently stand at £3.15 per week for Class 2 NICs and £15.85 a week for Class 3.
Britons typically need at least 10 years of NICs to qualify for any kind of retirement payment at all and at least 35 years to receive the maximum state pension amount.
The government said the move means that “people have more time to properly consider whether paying voluntary contributions is right for them and ensures no one need miss out on the possibility of boosting their state pension entitlements.”
But the government added that paying voluntary contributions does not always increase state pension entitlement: “Before starting the process, eligible individuals with gaps in their NI record from April 2006 onwards should check whether they would benefit from filling those gaps”.
Alice Hayne, personal finance analyst at Bestinvest, said: “The good news is that Britons with gaps in their National Insurance record no longer need to panic about running out of time to make up a gap and receive the full pension income they are entitled to. Buying back missed years is a great way to bolster retirement income, and this window of opportunity to backdate contributions all the way to 2006 is something not to be ignored.
“The deadline extension will not only give the government time to catch up on the volume of enquiries, but also allow more taxpayers to find out if they would benefit from making up any missing years. The extra time will also give those that will gain from making up a shortfall the chance to build up funds to cover the cost, which can run into the thousands, depending on how many missing years they have on their record.”
Individuals can check their records by obtaining a state pension forecast. To check individual NI records, use the government’s personal tax account website.
7 June: Arrears And Repossessions Also On The Increase
Household budgets continue to face intense pressures, according to industry figures which show mortgage borrowing and personal savings fell in the first three months of 2023 while arrears and home repossessions increased, writes Jo Thornhill.
UK Finance’s Household Finance Review for the first quarter of the year found mortgage lending to first-time buyers and home movers fell to its lowest level since the early months of the Covid 19 pandemic in 2020.
Excluding those months during lockdown when the housing market was effectively closed, first-time buyer numbers are at their lowest since 2015.
As we reported earlier this week, the number of first-time buyers opting for a mortgage over 35 years or more (increasing the term of the loan can make it more affordable) is also at a record high, at 19%.
For the first time in 15 years, the savings held by households has contracted year on year with the total value of money on deposit in instant access accounts falling by 4% to £867 billion, compared to £905 billion at the same time last year.
Among households still able to put away cash savings, there has been a revival of longer-term savings products, such as fixed rate bonds and notice accounts. These accounts, which have been unpopular over the past decade due to low interest rates, are now showing increased popularity due to more competitive terms.
The number of borrowers getting into difficulty with their mortgage repayments rose in the first few months of the year following a rise in Q4 of 2022. There were 2,530 new cases of arrears in the first three months of 2023, up from 1,050 in the final quarter of 2022. It brings total arrears cases to 83,760.
Home repossession figures also climbed, albeit from a low base, according to UK Finance. Possessions figures had seen an expected dip in the last quarter of 2022, as the industry paused enforcement activity through the festive season. But the numbers resumed a gradual increase in the early months of this year.
There were 1,250 mortgage possessions recorded in the first three months of 2023, up from 860 in the previous quarter – but up 28% from the 960 possessions seen in the first quarter of 2022.
Eric Leenders at UK Finance, said: “We expect near term mortgage market activity to remain relatively fragile. Borrowers coming to the end of their fixed-rate deal are encouraged to seek advice from a whole-of-market broker.”
Consumer spending (on debit and credit cards), which typically sees a dip in the early months of the year, as households tighten their belts after the festive period, was predictably subdued in the first quarter of the year. But this was partly offset by higher than expected spending on travel and foreign holidays.
Overall credit card debt is up around 10% year on year.
Sarah Coles, personal finance expert at Hargreaves Lansdown, said: “Our enthusiasm for travel has held up surprisingly well. It seems as though having to stay home during the pandemic has shifted how people see their holidays – so more are classing it as an essential that they can’t do without – no matter how hard it is to afford.
“For some consumers, they are covering the extra costs with savings, perhaps build up during the pandemic.”
5 June: Electric Vehicles Boom As Diesels Slump
New car sales to private buyers fell in May, with fleet sales alone helping the industry achieve a tenth consecutive month of growth.
Official figures from the Society of Motor Manufacturers and Traders (SMMT) showed that May’s 65,932 private registrations marked a 0.5% drop compared to the same period last year.
Meanwhile, the month’s 76,207 new fleet registrations figure was up by more than 20,000 on May 2022.
For the month overall, there were 145,204 registrations, up by around 20,000, or 16.7%, on the same period in 2022.
While registrations improved year on year and reflected a tenth month of growth, they were lower than 2021’s numbers. In fact, discounting the pandemic-stricken May of 2020, registrations were at their lowest since 2011.
The electric Vehicle market continues to grow, with Battery Electric Vehicles (BEV) registrations up nearly 60% year-on-year to account for 16.9% of all registrations in May.
Ford’s Puma once again topped the best-sellers table in May, retaining its spot as the most registered vehicle for the year so far.
Mike Hawes, SMMT chief executive, said: “After the difficult Covid-constrained supply issues of the last few years, it’s good to see the new car market maintain its upward trend.”
The figures also show a continuing decline in sales of diesel vehicles, down almost a quarter year on year to 5,758.
Hugo Griffiths, automotive expert at carwow, said “With diesel cars now making up a near trace amount of the market, holding just a 4% share, and EVs representing 17% of sales, buyers from all walks are almost unanimous that new cars should be powered by petrol engines, electric batteries and motors, or a hybrid of those two technologies.”
Manufacturer Mercedes Benz last week joined calls to delay the ‘cliff edge’ for new rules that will, from January 2024, impose 10% tariffs on electric vehicle sales into and out of Europe if more than 40% of battery components come from outside either territory.
At the opening of a cell manufacturing plant in northern France, Mercedes chief executive Ola Källenius called for the introduction of the tariffs to be pushed back to 2027.
26 May: Report Suggests Millions Miss Out On Correct Products
Customers are failing to get the financial products they need when shopping online, according to a report that says up to 13 million ‘vulnerable’ people were affected in the past year, writes Candiece Cyrus.
The market regulator, the Financial Conduct Authority (FCA), defines a vulnerable customer as one who, “due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.
The Vulnerability Void study from consultants Newton involved around 3,000 consumers, including at least 50 who are vulnerable because of their physical, mental or neurodegenerative conditions. These include learning difficulties, autism, poor sight and Parkinson’s disease.
The vulnerable sample also included consumers who have difficulties understanding finance or are struggling financially, and those who have experienced moments of vulnerability such as falling ill, or suffering bereavement.
The report estimates that 30 million people in the UK shopped for financial products online in the past year, and that more than 24 million are estimated to be in the ‘vulnerable’ category. Of this group, around 13 million either did not get what they needed or are unsure they did.
The research suggests that online application processes for financial products fail to account for cognitive fatigue, can ‘raise alarm instead of awareness’ about risks, and use industry jargon.
It says this leaves vulnerable customers susceptible to falling into debt, being under-insured and using products such as short-term payday loans and prepaid debit cards. These products can incorporate high fees, while the former often charge high interest rates, making it easy to spiral into debt if repayments are missed.
Vulnerable customers who applied for products such as current accounts, savings accounts and insurance were more likely to get what they needed than those who started investing or took out credit.
Over 60% of vulnerable customers who were looking to start investing were not provided with the product they needed, while 72% of those who had an overdraft approved, 60% of those who took out a loan and 45% of those who took out a credit card, also did not get the product they needed.
Meanwhile, nearly 48% of vulnerable customers who remortgaged felt they weren’t given the product they required. This increased to 67% for vulnerable customers who took out a new mortgage.
Vulnerable customers who did not get what they needed used alternative channels (such as calling the provider or going into a branch), tried another provider or ‘gave up’ trying to get a product.
The FCA is to introduce new Consumer Duty rules from 31 July which stipulate that financial services providers must avoid causing ‘foreseeable harm’, and ‘drive good outcomes’ for their customers, especially those who are vulnerable.
25 May: UK Leads Europe For Stolen Payment Data
There are more stolen payment card details on the dark web from Britain than from any other European country, selling for an average of just £4.61, according to new research.
VPN provider NordVPN says the UK came third behind the US and India for stolen payment data, after analysing six million stolen details being sold illegally on dark web marketplaces.
The VPN provider’s study showed the UK had a total of 164,143 payment card details listed online, which was nearly as many as the next two biggest European victims, Italy and France, combined.
52% of the stolen British data concerned credit cards and 37% related to debit cards. The remainder of the data came from other payment cards.
Almost two thirds (63%) of the stolen UK data also came bundled with other personal information, including addresses, phone numbers, email addresses and National Insurance numbers.
NordVPN cybersecurity expert Adrianus Warmenhoven said: “The card numbers found are just the tip of the iceberg when it comes to payment fraud. This is a crime with a huge ripple effect and the extra information being sold makes it far more dangerous, as a skilled criminal can use these to acquire more personal details.”
Selling for an average of £4.61 per record, the asking price for Brits’ data was 18% cheaper than the global average (£5.61) and half the cost of Denmark data – the most expensive data for sale – at £9.23.
Despite higher-than-average numbers of stolen data, however, UK victims are less at risk than those in other countries, according to NordVPN.
Its Card Fraud Risk Index measures how likely payment information is to be sold with additional identifying data. The UK ranked 22nd place on the index, far behind the highest risk countries: Malta, New Zealand and Australia.
Staying safe online
The VPN provider advises cardholders to protect themselves online by using strong passwords comprised of a mix of upper and lower case letters, numbers and symbols, taking advantage of two factor authentication and keeping an eye out for suspicious transactions on bank and credit card statements.
If you spot anything you can’t identify, you should contact your card issuer urgently to investigate the unusual activity.
The majority of the data examined by NordVPN was not stolen using brute force techniques – that is, via computer programs that attempt transactions guessing the thousands or even millions of possible combinations of a card number until they successfully guess the correct combination.
Instead, data was harvested in other ways such as phishing – where web users are duped into following links to fraudulent websites and sharing payment details, or malware, where a malicious program which records their online activity is unwittingly downloaded to a user’s device.
To protect against these kinds of scams, you should only make purchases from trustworthy websites – checking carefully any links that led you there and the URL displayed in the address bar to make sure you’re not looking at a lookalike or ‘spoof’ site.
Similarly, you should never download files attached to an email you weren’t expecting, or from a sender you’re unfamiliar with. The same goes with websites, which you should check are genuine and trustworthy before downloading anything.
24 May: Soaring Grocery Costs Mean Checkout Woes Continue
Food prices are continuing to rise at near-record levels, despite the fall in overall consumer price inflation announced today by the Office for National Statistics, writes Jo Thornhill.
As reported in our story, the headline rate of inflation in the year to April fell from 10.1% the previous month to 8.7%. But the rate at which grocery shopping prices are rising – 19.1% – is only marginally down from the 45-year high of 19.2% in March.
Commenting on the figures, the Chancellor, Jeremy Hunt, said food prices remained ‘worryingly high’.
While lower wholesale energy price rises are helping reduce the main inflation rate, food prices have continued to rise. Inflation for staples including bread, milk, eggs and fresh fruit and vegetables remains stubbornly high.
A basket of 10 household food items, including eggs, milk, cheese, bread, bananas, pasta and tinned fish, now costs an average of £25.60 – £5.76 more than a year ago, according to the Office for National Statistics interactive inflation tool. This represents an annual inflation rate of 29%.
Among some of the biggest annual rises in food costs (all above the 19.1% grocery inflation figure recorded today) are:
- Cucumber: 83p each (+54%)
- Granulated white sugar: £1.08 (+47%)
- Olive oil 500ml-1litre: £5.95 (+46%)
- Broccoli (per kg): £2.38 (+44%)
- Iceberg lettuce: 79p (+41%)
- Baked beans 400g-425g: £1.07 (+41%)
- Cheddar cheese (per kg): £9.42 (+39%)
- Eggs per dozen: £3.29 (+37%)
- Carrots per kg: 66p (32%)
- Self-raising flour 1.5kg: 83p (30%)
- Frozen breaded/battered white fish 400-550g: £5.20 (+30%)
- Butter 250g: £2.34 (+28%)
- White potatoes per kg: 73p (+28%)
- Small yoghurt (single pot): 84p (+26%)
- Dry pasta 500g: £1.06 (+22%)
The ONS Shopping Price Comparison Tool, below, shows how much costs of individual products have risen in the past year.
It is not just food costs that remain extremely high. While the rate of increase in prices for many non-food grocery items is below the overall CPI rate of 8.7%, many are much higher – including in particular household cleaning products and children’s clothing.
Among some of the biggest annual price rises for non-food products are over-the-counter medicines such as cold and flu drink powder sachets (23%), washing-up liquid (18%), bleach (22%) and kitchen roll (33%), plus children’s clothing including sports trainers (21%) and girls’ coats (15%).
23 May: HMRC Says Three Million Could Get Savings Boost
Up to three million people on low incomes or receiving benefits stand to gain from an extension to the government’s Help to Save scheme, confirmed today, writes Jo Thornhill.
The scheme was due to end in September this year. But HM Revenue and Customs has confirmed it will continue until April 2025. A consultation, announced in the Budget in March, is looking at ways the scheme can be reformed and improved.
Help to Save is open to those receiving benefits including working tax credit, child tax credit and universal credit. Savers can deposit funds at any time from £1 up to a maximum of £50 a month.
The savings plans last for four years, with savers receiving a 50% government bonus, with payments paid in the second and fourth years. A saver making the maximum deposit each month would save £2,400 over four years. This would attract the maximum £1,200 bonus.
Deposits can be made by debit card, standing order or bank transfer and there is no limit on withdrawals, although withdrawing funds could affect the overall bonus payment.
Around 360,000 savers have opened an account since the scheme launched in 2018. But HMRC says an additional three million people could benefit as a result of the extension if they chose to participate.
Individuals are eligible to open a Help to Save account if they are receiving:
- Working tax credit
- Child tax credit (and are entitled to working tax credit)
- Universal credit, and they (with their partner, if it is a joint claim) had a minimum take-home pay of £722.45 in their last monthly assessment period.
Even if a saver’s circumstances change after they open the account and they are no longer receiving one of the qualifying benefits, they can continue to save in the account and receive the bonus. Find out more and apply at the government’s site.
18 May: Citizens Advice Calls For More Action On Social Tariffs
A million households gave up their broadband in the last year because they couldn’t afford it, according to new research.
Citizens Advice found people claiming Universal Credit (UC) were worst hit by rising bills, and were six times more likely to give up their broadband access than non-claimants. The charity also found UC recipients were four times more likely to be behind on their broadband bills.
Inflation-linked annual price hikes have seen some telecoms providers put their existing customers’ bills up by as much as 14.4% – typically adding 3 or 4% to the current rate of the consumer price index (CPI) or retail price index (RPI) each April.
Dame Clare Moriarty at Citizens Advice said: “People are being priced out of internet access at a worrying rate. Social tariffs should be the industry’s safety net, but firms’ current approach to providing and promoting them clearly isn’t working. The people losing out as a result are the most likely to disconnect.
“The internet is now an essential part of our lives – vital to managing bills, accessing benefits and staying in touch with loved ones. As providers continue to drag their feet in making social tariffs a success, it’s clear that Ofcom needs to hold firms’ feet to the fire.”
Last month the telecoms industry regulator Ofcom said that 95% of 4.3 million eligible UK households are not signed up for a social tariff. To see a list of the social broadband tariffs currently available, click here.
In January the watchdog also reported concerns about affordability in the sector. The Ofcom Communications Affordability Tracker showed three in 10 households – roughly eight million – reported struggling to pay for their phone, broadband, pay-TV or streaming bills.
17 May: Regulator Says Almost 6 Million Brits Miss Payments
Around 5.6 million UK adults say they have missed at least three of their last six monthly bill or credit payments, writes Bethany Garner.
This represents an increase of 1.4 million compared with May 2022, according to data from the Financial Conduct Authority (FCA), the UK financial watchdog.
As living expenses continue to rise, the FCA also found that 10.9 million adults are struggling to keep up with bills and credit repayments – up from 7.8 million 12 months earlier.
Financial pressures are having a knock-on effect on mental health, with almost half UK adults (28.4 million) saying they felt more anxious in January 2023 than they did six months earlier, due to rising living costs.
With millions of individuals forced to skip monthly payments, the FCA is urging anyone struggling to afford bills or credit payments to get in touch with their provider as soon as possible.
The watchdog is also clamping down on lenders that do not offer customers appropriate support. The FCA recently told 32 lenders to change the way they treat customers, and secured £29 million in compensation for 80,000 borrowers.
Laura Suter, head of personal finance at AJ Bell, said: “While lenders are being urged to be supportive and lenient with customers, the nation faces a ticking time-bomb of defaults, whether that’s on mortgages, debt or council tax.
“Anyone struggling with repayments needs to face the issue head on. They should approach their lender to at least find out their options and weigh up which might work best for them. If they want an independent opinion they could speak to a charity such as Citizens Advice.”
16 May: Embattled Savers Withdraw £53Bn In Year To April
As the cost of living crisis drags on, almost a third of UK adults have dipped into their savings to make ends meet, collectively withdrawing more than £53 billion, writes Bethany Garner.
In the 12 months to April 2023, 29% of UK adults say they used savings to keep up with living costs, according to a study commissioned by life insurance broker LifeSearch (conducted by the Centre for Economics and Business Research (Cebr)).
The study, which surveyed 3,006 UK adults, found that 52% think they are in a worse financial position today than they were a year ago.
The study found that, in the coming months, respondents expect to become £232 worse off per month on average.
This pressure is largely down to the rising cost of everyday essentials, such as fuel and groceries. According to the Competition and Markets Authority (CMA), the increases are not solely driven by external factors.
Retail profit margins on petrol and diesel, for instance, have increased over the last four years. According to CMA analysis, average supermarket pump prices are five pence per litre higher than they would have been if average margins remained at 2019 levels.
Sarah Cardell, chief executive of the CMA, said: “Although much of the pressure on pump prices is down to global factors including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps.”
Mixed responses
While the majority of adults feel financially worse off than they did last year, 15% of respondents said they feel better off, and 33% said they feel about the same.
Adults aged 55 and over were the most likely to say they’re financially worse off, with 57% feeling worse off now than 12 months ago.
Younger adults were comparatively optimistic – just 41% of 18 to 34 year olds said they felt worse off now than this time last year, and 23% felt better off.
That’s despite the fact that this age group predicts they’ll be £367 worse off each month on average.
Nina Skero, chief executive at Cebr, said: “The latest edition of the Health, Wealth and Happiness Index shows that 2022/23 was a tough period for households. We expect pressure to persist in the coming year, especially in terms of inflation and spending power.
“Nevertheless, the outlook is somewhat rosier than was the case at the turn of the year, with consumers showing considerable resilience in the face of troublesome economic conditions.”
Dipping into savings isn’t the only action individuals are taking to make ends meet.
Over half of respondents (55%) told LifeSearch they have been using the heating less frequently to save money, while a further 25% have reduced their usage of household appliances, and 11% have delayed a large purchase, such as a car.
Adults aged 55 and over were more likely to cut back on heating than other age groups, with 62% saying they had done so in the last 12 months.
Elsewhere, 11% of adults have reviewed home and car insurance policies in search of a cheaper deal, and 25% have sold items they no longer want or need.
A significant portion of respondents – 17% – admitted to cooking fewer hot meals to cut costs, and 3% said they had turned to a food bank in the last 12 months.
Around one in three (30%) adults expect this financial strain to have a negative impact on their mental health.
Borrowing and credit
For some, however, cutting back on daily expenses isn’t enough.
Just under one in 10 adults (8%) say they have borrowed from friends and family to get by in the past 12 months, while a further 11% have taken out new unsecured credit.
Women were slightly more likely to have borrowed from friends and family, with 10% of women having taken this step versus 7% of men.
A further 5% of adults aged 34 and under said they were gambling more in a bid to increase their income.
Emma Walker at LifeSearch, said: “After the record lows we saw in the Index at the height of the pandemic, we experienced some optimism last year when we saw some green shoots of recovery as the Index rebounded.
“But that was short-lived as the cost-of-living crisis has dragged the Index back down close to pandemic levels again.”
9 May: Knock-On Effect Of Closures Will Force Prices Higher
The Federation of Small Businesses (FSB) is calling on energy firms to offer small businesses tariffs that reflect today’s wholesale energy prices, as it says hundreds of thousands of companies are trapped in fixed deals based on prices which soared in the last half of 2022, writes Candiece Cyrus.
It says failure to alleviate business expenses will feed through to higher household bills and result in business failures.
More than 700,000 small firms fixed their energy contracts between 1 July and 31 December last year, and 13% of this group (93,000) are now faced with needing to downsize, restructure or close due to not being able to keep up with their energy costs, says the FSB.
This follows a cut in government support to businesses last month, as the Energy Bill Relief Scheme was replaced with the Energy Bills Discount Scheme (see 30 March update).
The FSB says that businesses have now reverted back to paying the peak prices they were charged last year, which could be three or four times more than they paid when the Relief Scheme was in place.
Around 42% of all the firms that fixed contracts in the latter part of last year say it has been impossible for them to pass on costs to customers, who are already struggling with soaring prices.
The FSB’s data shows a large proportion of the struggling firms are from the accommodation and food sector (28%) and the wholesale and retail sector (20%).
It is calling on energy firms to automatically allow small firms the option to extend their fixed contracts at a rate between their original fixed rate and the current, lower wholesale rate.
Tina McKenzie at FSB said: “It’s disheartening to see a significant proportion of small firms could be forced to close, downsize or radically restructure their businesses just when we look to grow our economy. Our community shrank by 500,000 small businesses over the two years of COVID; we shouldn’t now be adding any more to that gruesome tally.
“The least energy suppliers should do is to allow small businesses who signed up to fixed tariffs last year to ‘blend and extend’ their energy contracts, so that their bills are closer to current market rates. We’d also like to see the Government and Ofgem support this initiative.”
May 5: Rocketing Repair Costs Adding To Cost Of Cover
The average price of a used car reached £17,843 in April, according to the Auto Trader Retail Price Index, with an inevitable knock-on effect on insurance premiums, writes Mark Hooson.
The increase in car prices equates to a near 3% jump in a year, but average prices shot up by 1.5% from March.
April marked the 37th consecutive month of year-on-year price rises, but not all vehicle types are going up in value.
Average prices of used electric vehicles (EVs) in April this year were 18.1% lower than in April 2022, at £31,517. Last month also marked the fourth consecutive month in which average EV prices fell.
Auto Trader’s Richard Walker, said: “The used car market has had a strong year so far. Rising used car values have done little to dampen demand and, based on what we’re tracking across the market, there’s no indication of it slowing significantly anytime soon.”
With car insurance premiums dictated, in part, by the value of a vehicle and the cost of parts and repairs, the rising average price of a used car is having a knock-on effect.
Data from the Association of British Insurers (ABI) in February showed average premiums were up 8% to £470 in the fourth quarter of 2022.
As part of its research, the ABI said its members – over 90% of the UK insurance industry – blamed higher paint and material costs, up by nearly 16%.
It says 40% of all repair work is affected by parts delays, and that the average price of second-hand cars increased by 19% in the year ending July 2022.
Jonathan Fong at the ABI said: “Every motorist wants the best insurance deal, especially when coping with cost of living pressures, and insurers continue to do all they can to keep motor insurance as competitively priced as possible.
“Yet, like many other sectors, insurers continue to face higher costs, such as more expensive raw materials, which are becoming increasingly challenging to absorb.”
4 May: Tariff Change Casts Shadow Over EV Manufacturing In UK
Uptake of electric vehicles (EVs) continues to gather pace as the UK approaches a ‘cliff edge’ for tariffs on vehicles sold into Europe.
The latest data from the Society of Motor Manufacturers and Traders (SMMT) represents the ninth consecutive month of growth in the new car market, with EVs now making up roughly one in six (15%) new registrations.
New vehicle sales were up 11.6% in April at around 132,000 registrations. This is the best April since 2021 but much lower than registration levels pre-pandemic. By comparison, April 2019 registrations were around 17% higher.
Battery electric vehicles (BEV) registrations were up by more than half (59.1%) in April, at 20,522 units. Plug-in hybrid vehicles (PHEVs) were up 33.3% at 8,595 registrations. Hybrid electric vehicles (HEVs) were up 7.7% to 15,026 registrations.
The SMMT has revised its predictions upward for the quarter, anticipating higher-than-expected registrations as a result of lower pressure on supply chains. This is the first time it has done so since 2021.
‘Country of origin’ changes
Meanwhile, a forthcoming change in the UK’s trading relationship with Europe could have an impact on EV registrations unless a new agreement is reached.
As it stands under the UK-EU Trade and Cooperation Agreement (TCA), the UK can sell EVs into Europe without having to pay tariffs as long as no more than 70% of an electric battery’s components come from outside the UK. From the beginning of 2024, however, the threshold will drop to 40%.
At that point, any vehicle with a battery comprised of more than 40% imported components will attract a 10% levy when sold into Europe. This could deter manufacturers from setting up or remaining in the UK.
While the change is eight months away, fulfilling orders in time for sale in the EU next year will start well ahead of that time, creating uncertainty for manufacturers about whether the agreement can be amended in the meantime.
In February the Department for Business and Trade said: “We are aware that some members of UK and EU industry are concerned about the 2024 rules and we continue to work closely with industry to understand and mitigate the impact of external factors, such as the Covid-19 pandemic and the global semiconductor chip shortage on the production of electric vehicles and batteries.”
Hugo Griffiths, spokesperson at Carwow, said: “There are issues around sourcing EV battery components, sure, and both the EU and UK are way behind other nations’ battery-production capabilities, and this needs addressing.
“But insisting that from next year only 40%, rather than 70%, of an EV’s battery components can come from outside the UK or EU before additional trade tariffs kick in is a purely synthetic, legislative problem: it has been concocted by policymakers, so it must be solved by them on behalf of the populations they represent.”
4 May: £1.6bn Added To Household Debt
Consumers borrowed £1.6 billion in March, up from £1.3 billion 12 months ago, according to fresh data from the Bank of England, writes Jo Thornhill.
The figure is also up on the £1.5 billion reported in February, making it the six monthly increase in a row.
Borrowing in March was split between £700 million on credit cards and £900 million on other forms of consumer credit, such as car dealership finance and personal loans.
The cost of credit card borrowing edged higher, increasing by 0.18 percentage points to its highest ever level at 20.29%.
Interest rates on bank overdraft borrowing fell by 0.27 percentage points, according to the report, to stand at 21.07%. The rate on new personal loans fell by 0.36 percentage points to 7.79%.
Mortgage approvals for house purchase rose significantly in March, according to the Bank data, reaching 52,000, up from 44,100 in February. However, the figures remain subdued compared to the levels seen in March 2022, when mortgage approvals were recorded at 70,700.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘We regard mortgage approvals as a very useful indicator of future direction of travel for the housing market.
“Lending was in the doldrums, reflecting the quiet period between the mini-Budget and the end of last year, whereas the approvals figures illustrate that stabilising mortgage rates and inflation is prompting an increase in activity.”
The Bank says households withdrew £4.8 billion from banks and building societies in March. Net deposits into interest-bearing easy access accounts fell significantly, but £6.5 billion was paid into notice accounts.
In addition, during March, households deposited £3.5 billion into National Savings and Investment (NS&I) accounts. This is the highest net flow into NS&I since September 2022, when the figure was £5 billion.
3 May: Consumers Told To Assume Any Contact Is A Scam
The government announced today that all cold calls offering financial products will be banned to protect consumers from scams, writes Bethany Garner.
While cold calls relating to pensions have been banned since 2019, the new rules will apply to all financial products – including investments, insurance and cryptocurrency.
According to government estimates, fraud accounts for 40% of crime in the UK and costs individuals around £7 billion each year.
Once the new rules come into effect, consumers can automatically assume that any unsolicited calls about financial products are scams.
The new rules will also ban ‘Sim farms’ – where fraudsters send scam text messages to thousands of people at once – and prevent scammers from impersonating the phone numbers of legitimate banks and other businesses.
At the same time, a new National Fraud Squad is to be created, led by the National Crime Agency and City of London Police. The squad’s 500 members will work with the international intelligence community to identify and disrupt potential scams, the government says.
Funding to the tune of £30 million will also be funnelled into a new fraud reporting centre, which will be operating “within a year” and which will work with tech companies to make reporting online fraud easier.
Tom Selby, head of retirement policy at AJ Bell, said: “Financial scams are a scourge on society and ruin lives, so any move to protect more consumers from different types of fraud is extremely welcome.”
“For this cold-calling crackdown to work we need two things: tightly worded legislation, to ensure nefarious contacts are specifically targeted, and a legitimate threat of enforcement where someone breaks the new rules.
“The plans also need to go hand-in-hand with greater responsibility being taken by internet giants like Google for paid-for scam adverts, something which the Online Safety Bill can hopefully bring into UK legislation.”
While these plans are widely welcomed, the government has faced criticism for not acting sooner.
Rocio Concha at consumer group Which? said: “The fight against fraud has progressed far too slowly in recent years and in particular more action is needed to guarantee that big tech platforms take serious action against fraud.”
Mr Selby also warns consumers to remain vigilant: “It is vital, regardless of what the government does, that Brits keep their wits about them and are cautious when they are contacted out of the blue by someone they don’t know about their finances.”
2 May: Spring Discounts Barely Dent Annual Price Increases
The soaring cost of shop prices appears to have peaked but food is continuing to get more expensive, according to figures out today from the British Retail Consortium (BRC), writes Laura Howard.
It says annual shop price inflation slowed to 8.8% in April, edging down from 8.9% in March. But shop-bought food costs continued to climb in April, with annual inflation for this category rising to 15.7% from 15% in March.
The cost of fresh food and ambient food, which can be stored at room temperature, continued to accelerate in the 12 months to April by 17.8% and 12.9% respectively (17% and 12.5% in March).
The BRC said cost pressures throughout the supply chain, more expensive ready meals due to higher packaging costs and the high price of coffee beans were primary drivers behind the food prices rise.
Experts say the overall shop price plateau is due to heavy ‘Spring discounts’ in the clothing, footwear and furniture sectors.
Non-food inflation fell to 5.5% in April, down from 5.9% in March. While the figure remains elevated, it is below the three-month average rate of 5.6%, said the BRC. Inflation for other food categories is above the three-month average.
Helen Dickinson, chief executive of the BRC, said: “We should start to see food prices come down in the coming months as the cuts to wholesale prices and other cost pressures filter through.”
The official UK inflation figure, as measured by the Office for National Statistics’ Consumer Price Index (CPI), eased from 10.4% to 10.1% in the year to March 2023, but is still more than five times the Bank of England’s target of 2%.
14 April: Drivers Obliged To Concentrate As If Driving Normally
Ford has become the first car manufacturer to offer hands-free driving in Europe with the introduction of ‘BlueCruise’ technology in its 2023 Ford Mustang Mach-E electric vehicles (EVs), writes Candiece Cyrus.
With the vast majority of road traffic accidents deemed to be the result of human error, it is hoped the introduction of increasingly sophisticated autonomous vehicles will improve safety statistics, which in turn may result in a general reduction in car insurance premiums.
Drivers of the Ford Mustang Mach-E model, which costs from £50,830, can use what the manufacturer calls ‘hands-off, eyes-on’ technology. It has been government-approved for driving on 2,300 miles (3,700km) of motorways in England, Scotland and Wales, which have been designated as ‘Blue Zones’.
The first 90 days’ use of BlueCruise is included with the purchase of the vehicle. After this, drivers can subscribe to use it for £17.99 a month.
The ‘Level 2 hands-free advanced driver assistance system’ builds on Level 1 cruise control technology, which is available as standard in an increasing number of cars and sets a vehicle’s accelerator at a specific speed, allowing the driver to take their foot off the pedal.
There are six levels of driving autonomy in total. Level 0 provides no automation, while Level 3, the step beyond this Ford initiative, provides conditional automation, which includes features such as a traffic jam chauffeur.
Level 4, high automation, includes vehicles where a wheel and pedals are not installed, such as a driverless taxi, while Level 5, full automation, offers the same features as Level 4, but everywhere and in all conditions. Both 4 and 5 do not require any form of manual driving.
BlueCruise uses cameras and radars to monitor the environment, including traffic, road markings, speed signs and the position and speed of other vehicles, to allow drivers to take their hands off the steering wheel.
An infrared driver-facing camera is also used to check the driver’s attentiveness, by monitoring their gaze, even when wearing sunglasses, as well as the position of their head.
If the system detects a lapse in the driver’s attention, it will display warning messages. This is followed by audible alerts, activation of the brakes and finally slowing the vehicle down while controlling steering. Similar actions will take place if the driver does not place their hands on the steering wheel on leaving a Blue Zone.
Ford has already introduced the technology in its own–branded and luxury Lincoln-branded vehicles, in the US and Canada, where it has been used across 64 million miles (102 million km), during an 18-month period. During this time, there have been no reported linked incidents or accidents, according to Ford.
The firm intends to roll out the technology across other European countries and other Ford vehicles.
Jesse Norman, transport minister, said: “The latest advanced driver assistance systems make driving smoother and easier, but they can also help make roads safer by reducing scope for driver error.”
The introduction of hands-free technology in driving is part of the larger goal of ultimately producing fully autonomous vehicles. It is thought that such technology could reduce the number of accidents on the roads and in turn car insurance costs, with the potential to save up to 1,500 lives a year. Currently, nine out of 10 accidents on the road are a result of human error.
However, car insurance is still a necessity even when driving a car that uses automated driving technology. It can cover theft of the vehicle, as well as accidents where the driver or the automated system is at fault.
Drivers will need to be able to take control of the vehicle if necessary. Falling asleep and crashing the car, for example, would put them at fault.
If someone is injured or their property damaged as a result of an accident with a driverless car, they could claim in the usual way against the insurer of the vehicle. The insurer then may choose to pursue its own claim against the vehicle manufacturer if it believes the autonomous driving technology is to blame.
Drivers can find a map of the Blue Zones on the Ford website.
5 April: Electric Vehicle Registrations Hit Record Monthly High
The number of battery electric vehicles (BEVs) registered in the UK in March reached a record monthly high of over 46,600 – up 18.6% from around 39,300 in March last year, according to the Society of Motor Manufacturers and Traders (SMMT), writes Candiece Cyrus.
However, the overall BEV market share remained almost the same as last year at a little over 16%.
Overall, new car registrations rose year-on-year by 18.2% last month – the highest level recorded by the SMMT in a ‘new plate month’ since before the pandemic. Year-related registration plates are released in March and September.
As supply chain issues eased coming out of the pandemic, March marked the eighth consecutive month of growth in the car market, with almost 288,000 units delivered compared to around 243,400 last year. The first three months of 2023 were the strongest for the market since 2019, with just under 500,000 new cars registered.
Plug-in hybrid (PHEV) registrations rose by 11.8%, from just over 16,000 registrations last year to almost 18,000 this year. Plug-in registrations overall – the total of BEV and PHEV registrations – comprised 22.4% of the market – a slight fall on last year.
This follows the closure of the government’s plug-in car grant scheme in June last year.
Hybrid (HEV) registrations fared better, rising by 34.3% from around 27,700 last year to around 37,200 this year – its largest year-on-year growth – helping electric vehicles account for more than 33.3% of car registrations last month.
Hybrids use both battery and internal combustion engine powertrains.
Year-to-date in 2023, BEVs accounted for over 76,000 sales compared to over 64,100 in the period between January and March 2022, showing growth of 18.8%. PHEVs accounted for over 31,700 sales, and HEVs over 65,800 sales, seeing growth of 6.7% and 36.9% respectively compared to January and March last year.
The Tesla Model Y – a BEV – was the most popular car model in March, with 8,123 sold, followed by the Nissan Juke (7,532) and the Nissan Qashqai (6,755).
With the publication of the government’s consultation on a Zero Emission Vehicle Mandate last week, the SMMT said: “The market will have to move more rapidly to battery electric and other zero tailpipe emission cars and vans.
“Models are coming to market in greater numbers, but consumers will only make the switch if they have the confidence they can charge whenever and wherever they need.
“Success of the mandate, therefore, will be dependent not just on product availability but on infrastructure providers investing in the public charging network across the UK.”
Mike Hawes, the SMMT’s chief executive, said: “March’s new plate month usually sets the tone for the year so this performance will give the industry and consumers greater confidence.
“With eight consecutive months of growth, the automotive industry is recovering, bucking wider trends and supporting economic growth. The best month ever for zero emission vehicles is reflective of increased consumer choice and improved availability but if EV market ambitions – and regulation – are to be met, infrastructure investment must catch up.
28 March: Fruit And Vegetables Drive Soaring Food Costs
Rocketing food and drink prices have pushed shop price inflation to a record high, according to figures from the British Retail Consortium (BRC), writes Jo Thornhill.
Annual food inflation was recorded at 15% in March – up from 14.5% in February. It is the highest level seen since the BRC started collecting the data for its Shop Price Index in 2005.
The index is a measure of the cost of 500 of the most commonly bought items – including food, drink and non food goods, such as clothing and electrical appliances.
Non-food price inflation rose from 5.3% to 5.7% for the same period and overall shop price inflation rose to 8.9% – up from 8.4% in February and marking a record high.
The steepest price rises were seen in fresh foods, such as fruit and vegetables, driven by shortages and supply issues. Inflation for prices of fresh food rose 0.7 percentage points in March to 17%.
Helen Dickinson OBE, chief executive at the British Retail Consortium, said: “Shop price inflation has yet to peak. As Easter approaches, the rising cost of sugar coupled with high manufacturing costs left some customers with a sour taste, as price rises for chocolate, sweets and fizzy drinks increased in March.
“Fruit and vegetable prices also rose as poor harvests in Europe and North Africa worsened availability, and imports became more expensive due to the weakening pound. Some sweeter deals were available in non-food, as retailers offered discounts on home entertainment goods and electrical appliances.
“Food price rises will likely ease in the coming months, particularly as we enter the UK growing season, but wider inflation is ex
