Cost of living - latest updates: UK now set for 6.25% interest rate this year, economists forecast; 'take meter reading' warning ahead of price cap change (2023)

Key points
  • Bank of England 'will push UK into recession this year' - as interest rate forecasts hit 6.25%
  • Households advised to take meter readings ahead of price cap changes this weekend
  • Parents on Universal Credit to receive hundreds more pounds from tomorrow - so what do you need to know?
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One in 20 newly listed private rental properties on Zoopla affordable for people on housing benefit

Only one in 20 (5%) newly listed private rental properties on Zoopla in the first quarter of 2023 were affordable for people receiving housing benefit or Universal Credit, according to the Institute for Fiscal Studies (IFS).

In its report, the IFS, whose research was funded by the Joseph Rowntree Foundation (JRF), said that on average, housing costs amounted to 11.4% of UK households' incomes.

It defined rents as being affordable if they could potentially be completely covered by benefits.

Local housing allowance (LHA) rates - which govern the maximum amount of support for their rent that low-income private renters can get - have been frozen in cash terms since April 2020, the IFS noted.

Its report said: "This means that the support available for private rents is steadily declining in real terms - something that is especially important at the moment as rents are rising very rapidly."

Rising mortgage rates are also likely to feed through into the rents being asked as they push up landlords' costs.

Speaking to Sky News on the latest findings, co-author of the IFS report Tom Waters said there have been "substantial increases" in rent across the board.

"About 40% of private renters are on housing benefit so you are talking about quite a large number of people all competing for a relatively small number of properties," he said.

He said the way to get rents down in the longer run was to build more properties.


Asking prices for properties jump by 3.5%

We're getting used to hearing dire predictions for the housing market but new data published in The Negotiator today, looking at stats from homeowner database TwentyEA, suggests conditions aren't as bad as you might think.

The database shows there has been a3.5% increase in asking prices for properties during the past year, and a 24% rise since 2019.

And when it comes to the average property, growth in the last year equates to £16,000.

Over the year, exchanged prices have also risen by 4.7%.

The figures reflect a compound annual growth rate of 4.4% per year and come amid rising mortgage rates.

Executive director of TwentyEA Katy Billany, told The Negotiator the growth in instruction prices year on year had been highest in Northern Ireland (9%), the North West (7.5%) and Scotland (7.1%).

She also noted that prices on listings had increased across every price bracket.


NHS consultants vote to strike for two days next month

Senior hospital doctors have voted to strike for two days next month, the British Medical Association has said.

Union members were asked to vote on "Christmas Day levels of care", the medical union said.

It added: "This would ensure that emergency care would continue to be provided, but elective or non-emergency work would need to be cancelled."

The consultants will walk out on 20 and 21 July.


JD Sports expects profits to pass £1bn this year

JD Sports has said it is on track to pass £1bn in profits this year despite aslowdown in its US and Canadian markets.

The group has said trading from about 3,400 stores in 32 countries has been expanding rapidly, boosted by appetite from young shoppers who are less affected by rising bills and who seek out JD for special access to Nike and Adidas products.

"Inventories in our businesses in North America are at normal levels and we will be no more promotional than we need to be to remain competitive," a JD Sports spokesperson told Retail Gazette.

Peel Hunt analysts have also said shares in JD are up 16% so far this year.

"The US performance will probably catch the headlines but Europe and the UK have picked up any bottom-line slack," the analysts said.


Parents on Universal Credit to receive hundreds more pounds from tomorrow - so what do you need to know?

Parents on Universal Credit will soon be eligible to claim hundreds of pounds more in support as the government tries to get more people back into work.

From 28 June, a change in government support funding will help those whose costs are greaterthan £760 a month for one child, and £1,304 a month for two or more children.

However, it is important to note that you may not be able to get the new amounts immediately as this depends on when your Universal Credit assessment period ends.

So what will you be entitled to?

From tomorrow, parents will still only be able to claim up to 85% of their costs, but the caps will increase to the following:

  • If you have one child the maximum amount you will be able to claim back will rise from £646 to £951 a month;
  • Have two or more children? The maximum level of support will rise from £1,108 to £1,630 a month.

Not sure if you are able to receive benefits?

If you are not sure whether you should be receiving benefits you can use Money Saving Expert's benefits checker here.


Bank of England 'will push UK into recession this year' - as interest rate forecasts hit 6.25%

The UK will be pushed into a recession by the end of the year, according to analysts at Bloomberg Economics.

Experts at the news agency said the Bank of England - which last week shocked investors by raising interest rates half a percentage point to 5% - will tip the country into a year-long recession starting in the fourth quarter of this year.

They note a downturn was the price of "taming an inflation rate that remains stubbornly close to double digits".

Analysts have also said that money markets are almost fully pricing in the Bank of England raising rates to 6.25% by December and that could see the UK economy hit a "far worse slump".

Last week, the peak forecast was 6% - a few months ago it was only 4.5%.

The latest analysis follows the Bank of England's decision to raise the base interest rate last week to 5% - the highest level since 2008.

Economists had expected the Monetary Policy Committee to raise interest rates by only a quarter percentage point, but the MPC voted 7-2 for the surprise increase, explaining that it was aiming to bring higher-than-expected inflation under control and indicating concern about high wage increases and company profit margins.

The majority of investors now expect another0.5 percentage point rise at the start of August.

The UK currently has higher inflation than any other country in the G7 and is expected to see its interest rates peak higher than other major economies.


Five things you should do to make sure you're saving money when price cap changes

We reported earlier that consumer rights expert Martin Lewis was advising households to take meter readings ahead of price cap changes this weekend (see our post at 7.50am).

Ahead of the energy price cap changing on 1 July, Uswitch energy has said it "remains vital" that households keep on top of their usage.

Energy expert at the companyBen Gallizzi said:"Taking regular meter readings and checking the level of your direct debit are as important as ever, and it is also worth keeping a close eye on the energy market as fixed deals return.

"The energy market remains volatile, so deals are mostly being offered only for short periods and to limited numbers of customers.

"Consumers need to be proactive and prepared to move quickly if they want to lock in certainty over their energy bills with a fixed deal."

Here is achecklist for households preparing for the price cap, courtesy of Uswitch...

  • Keep your meter readings up to date and ifyou do not have a smart meter, regularly take meter readings and submit them to your supplier. This makes sure your bill is accurate;
  • Check your monthly direct debit payments reflect your actual use and inform your provider if not;
  • Monitorhow much energy you're using by downloading Utrack, a free mobile app that offers regular insights into your energy spend;
  • Sign up for alerts on fixed tariff announcements so you can decide to lock in a deal if one becomes available;
  • Check what energy support schemes or grants you, or any vulnerable friends or relatives, may qualify for.


How an Xbox button can save you £5 a month

The cost of living crisis has left many cutting back on items and activities and even their electricity.

But before you decide to pack up your games console there might be a way to save a little money on your bills while enjoying an odd game or two.

A button on the console could save you up to £5 a month, according to the the American technology websiteThe Verge.

So what do you have to do?

If you own an Xbox in the UK and Europe, then it will most likely have a feature called "Instant On" switched on by default.

This puts the console in standby mode and makes it quicker to activate the machine every time you play.

But the problem is this mode wastes energy so the alternate option is to switch it to energy saver mode.

While this mode does mean you're cold booting your Xbox every time you play a game, placing it in this mode only consumes around 0.5 watts.

In comparison, Instant On consumes between 11 and 13 watts.

So the next time you sit down for a gaming session, why not find the energy saver mode instead and save a few pennies in the long run.


Germany set to raise its minimum wage by 3.4%

Germany is set to raise its minimum wage by 3.4% to €12.41 (£10.68) an hour from 2024, according to the proposals of a government appointed commission.

Raising the minimum wage, which increased to €12 per hour in October from €10.45, was one of the key election promises of Chancellor Olaf Scholz and his Social Democrats.

A hike would be likely to directly affect almost six million employees in Germany.

The country has the second-highest minimum wage in the European Union behind Luxemburg, which mandates a monthly minimum of €2,387.

If the proposed increase in Germany is approved, the eurozone's largest economy would see workers earn at least €2,054 a month.

Only six EU countries have a national minimum wage above €1,500 per month, including Luxembourg, Germany, Belgium, the Netherlands, Ireland and France, Eurostat data shows.

But Carsten Brzeski, global head of macro at ING, has said the increase now proposed is "very moderate and is too little" to make up for the increased cost of living.

The proposal still needs to be approved by Germany's Labour minister Hubertus Heil.


Nurses union fails to get mandate for strikes

A ballot for nursing strikes has failed to reach the legal threshold that it needs for the action to go ahead, a trade union said.

The Royal College of Nurses (RCN) said more than 100,000 of its members voted in favour of strike action, but turnout was only 43%, below the 50% required in law for a strike to go ahead.

This means strike action has been called off.

RCN chief executive Pat Cullen said in an email to members: "While this will be disappointing for many of you, the fight for the fair pay and safe staffing that our profession, our patients, and our NHS deserves, is far from over."

She went on to say she would be seeing the prime minister this afternoon to "hear him out" and to "ask him the questions".

Ms Cullen also said nurses had "started something special" and they would continue to use their voices.

A Department of Health and Social Care spokesperson said more than one million eligible NHS staff were receiving their pay rise and one-off payments this month.

"We hugely value the work of nursesand welcome the end to hugely disruptive industrial action so staff can continue caring for patients and cutting waiting lists," they added.


What will happen to interest rates in 2023 UK? ›

Consequently, we now anticipate interest rates to peak at 6.5% by the end of 2023, a full 1.5 pp higher than our previous forecast for a peak of 5.0% (see chart 1, below). This is one of the highest forecasts in the market and we anticipate rates at this level will drive the UK economy into a recession.

What is the interest rate forecast for 2023? ›

The mortgage interest rate forecast is for rates to stay the same or tick slightly lower in July, with average 30-year rates at 6.67% as of June 22, 2023, compared to 6.57% on May 25, 2023, according to the Freddie Mac Primary Mortage Market Survey (PMMS).

What will happen to UK interest rates in the next 5 years? ›

At the start of the year, we had expected UK interest rates to reach around 4.5% by the end of 2023. Today, we now expect that UK rates could rise up to 6.25% before the end of the year which marks a substantial material change."

How high could interest rates go UK? ›

The market is pricing in further interest rate hikes in 2023, predicting that the Bank of England base rate will rise to 6% by the end of 2023 before slowly falling over the next five years to end up around 3.7%.

How high will US interest rates go in 2023? ›

How high will interest rates go in 2023? Fed policymakers estimate they'll push up the key rate by another half percentage point to a range of 5.5% to 5.75% in 2023, according to their median forecast.

How long will interest rates stay high in 2023? ›

“While the Federal Reserve paused on interest rate increases in June, they left the door open for more increases in the coming months as long as inflation remains above the desired rate. Therefore, we expect mortgage rates to stay near their current rate in July 2023 and trend lower as inflation pressures ease.”

What will happen to interest rates in 2024 UK? ›

It is forecast to peak between 5.75% and 6% by the start of 2024. This means interest rates may not fall until the middle of 2024. Projections from Berenberg Bank anticipate the base interest rate to reach as high as 5.5% by September. It expects the Bank of England to then lower rates to 4% by the end of next year.

How high will interest rates go UK 2024? ›

Interest rates are now expected to peak at nearly 6% in mid-2024, think tank Resolution Foundation has warned, with the average two-year fixed-rate mortgage hitting a high of 6.25% later this year. Some rates being offered on mortgages have already risen above 6% according to Uswitch.

Will savings interest rates continue to rise in 2023 UK? ›

It's looking increasingly likely that rates will continue to rise throughout 2023, and analysts are not expecting rate cuts until late 2024. Indeed, analysts and markets are predicting rates could peak at as much as 6.25% by the end of the year.

Where can I get 5% interest on my savings UK? ›

Existing-customer regular savers – what we'd go for
ProviderRate (AER)How to open
Nationwide5.25% variable for two yearsOnline (also open to non-customers)
Barclays5.12% variable on up to £5,000Online/ app/ branch/ phone
TSB5% fixed for one yearOnline/ branch
HSBC5% fixed for one yearOnline/ branch/ phone
11 more rows
6 days ago

What is the highest UK interest rates have ever been? ›

What have been the highest interest rates in the UK? The highest interest rates in UK history were in 1979 when interest rates reached a whopping 17%. According to the BoE, the interest rate was at 5.5% in October 1977 before rising to 12.5% by the end of 1978.

What will interest rates be in 2025 UK? ›

The Bank of England will cut the base rate to 3 per cent by the end of next year and then 2.5 per cent by the end of 2025, according to forecasts. That would be a substantial decline from the current 4.25 per cent but would still represent rates rising like a rocket and falling like a feather.

What is the interest rate forecast for 2023 and 2024? ›

The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.

Will interest rates go down in 2023 2024? ›

Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.

What will interest rates be in 2023 2024? ›

Direct Loan Interest Rates for 2023-2024
Loan Type10-Year Treasury Note High YieldFixed Interest Rate
Direct Subsidized Loans and Direct Unsubsidized Loans for Undergraduate Students3.448%5.50%
Direct Unsubsidized Loans for Graduate and Professional Students3.448%7.05%
1 more row
May 16, 2023

What will US interest rates be in 2024? ›

In the long-term, the United States Fed Funds Rate is projected to trend around 4.75 percent in 2024 and 3.50 percent in 2025, according to our econometric models.

Will US interest rates go down in 2023? ›

1) Interest-rate forecast.

We project a year-end 2023 fed-funds rate of 5.25%, falling below 2.00% by mid-2025.

Will interest rates crash in 2023? ›

We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

Will there be more interest rate hikes in 2023? ›

After voting to leave interest rates unchanged in a target range of 5-5.25 percent, policymakers on the Federal Open Market Committee (FOMC) caught Fed watchers by surprise when they announced that they're also penciling in two more rate hikes for 2023.

How long will interest rates stay high? ›

The squeeze on mortgage costs is set to last until at least 2025 with interest rates expected to rise again this week. Experts have warned that rates are unlikely to start coming down again before the end of next year as inflation remains stubbornly high.

What are predicted UK interest rates 2026? ›

The good news in the long-term is that most economists expect interest rates will decline. This is because inflation, which the Bank of England tries to control by using its base rate, is expected by the central bank to halve by the end of 2023 before falling below its target rate of 2% between 2024 and 2026.

Will there be a recession in 2024 UK? ›

The economy looks to have fared better than expected in first half of 2023, and is set to steer clear of a recession, according to the CBI's latest Economic Forecast. The CBI is forecasting 0.4% growth in GDP over 2023, picking up to 1.8% in 2024, upgraded from -0.4% and 1.6% respectively.

Will the UK economy recover in 2024? ›

Economic Outlooks

The UK economy will likely escape a recession. That's thanks to a better outlook for energy prices, a more resilient global environment, and continued tightness in the labour market. We expect growth to remain weak though, with real GDP at just 0.3% in 2023, rising to 1.1% in 2024.

Where are interest rates going in the next 5 years? ›

An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.

What is the best thing to do with a lump sum of money? ›

Saving with a savings account

Cash savings are always popular with people who want to put away a lump sum and earn interest over a long period of time. This can be a very good way to save for things, without taking on bigger levels of risk.

Where can I put my money to earn the most interest in UK? ›

The go-to option if you're serious about earning interest on your savings, but won't need the money for a while, is a fixed-rate bond. These pay about the best interest available, but mean you have to commit to locking your money away for a set period.

Which bank gives 7 percent interest? ›

Right now, only one financial institution is paying at least 7% APY: Landmark Credit Union. Landmark pays 7.50% on its Premium Checking Account — however, there are some major caveats to consider. First, keep in mind that this is a checking account, not a savings account.

Where can I get 10 percent interest on my money? ›

How can I get 10% interest on my money? The best way to get 10% returns is to invest – you won't find 10% APY on any bank account in the U.S. The S&P 500 is a good place to start, but you should also consider real estate and other alternative investments, like art and wine.

Where can I get 5% interest on my savings account? ›

Here are the best 5% interest savings accounts you can open today:
  • GreenState Credit Union Savings Account – 5.01% APY.
  • Western Alliance Bank – 5.05% APY.
  • 12 Months: Bread Savings – 5.20% APY.
  • 27 Months: Sallie Mae – 5.15% APY.
  • 3 Years: Ibexis Fixed Annuity – Up to 5.00% APY.
  • 5 Years: Americo Fixed Annuity – Up to 5.25% APY.

Where can I get 6% on my savings? ›

Best 6% interest savings accounts
  • Digital Federal Credit Union (DCU) Primary Savings.
  • Mango Savings™
  • Clearpath Federal Credit Union 12-month CD/IRA.
Jun 22, 2023

What is the latest interest rate prediction for the UK? ›

The financial markets are predicting UK interest rates will hit 6% by the end of the year, and remain at that level until next summer, after the Bank of England hiked its benchmark rate by half a percentage point.

What is the highest interest rates have ever been in the US? ›

The highest mortgage rates in history were in the 1980s. Thirty-year fixed mortgage rates hit their peak at 18.63% in October 1981. This was likely due to high inflation following the OPEC embargo.

What is the highest US interest rate ever? ›

Interest rates reached their highest point in modern history in 1981 when the annual average was 16.63%, according to the Freddie Mac data. Fixed rates declined from there, but they finished the decade around 10%. The 1980s were an expensive time to borrow money.

What are predicted interest rates by 2030 UK? ›

Bank of England official nominal interest rates will rise linearly to 4% by 2030 (i.e., just over 25bp of hikes per year). This resting point for interest rates reflects a combination of long-term real GDP growth of 2% plus 2% inflation.

How high will interest rates go in 2025? ›

Mortgage Interest Rate predictions for December 2025. Maximum interest rate 4.09%, minimum 3.85%. The average for the month 3.96%. The 30-Year Mortgage Rate forecast at the end of the month 3.97%.

Will interest rates go down in 2023 or 2024? ›

By the end of 2023, the gap between the expected federal funds rate and the expected rate of core personal consumption expenditures inflation is 1.7%. By the end of 2024 that spread actually widens to 2%, as the interest rate declines but the rate of inflation falls more sharply.

Will UK interest rates go down in 2024? ›

However, financial markets expect the base interest rate to keep climbing. It is forecast to peak between 5.75% and 6% by the start of 2024. How soon after this interest rates will fall will depend on how quickly inflation cools.

Will interest rates go down in 2023 savings? ›

The national average rate for savings accounts will be 0.29 percent by the end of 2023, McBride forecasts, while predicting an average of 0.34 percent for money market accounts.

Should I buy a house now or wait until 2023 UK? ›

This will make monthly mortgage payments more expensive, which could mean 2023 is not a good time to buy a house. However, there is no guarantee that rates won't rise further, so if you are in a position to buy now it could be better to get on the ladder sooner instead of waiting until 2024.

Will mortgage rates go up in 2023 and 2024? ›

The Mortgage Bankers Association and the National Association of Realtors join Fannie in predicting a decline in mortgage rates starting in the second half of 2023 and continuing into 2024.

What will interest rates be at end of 2024? ›

An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.

What will 30 year interest rate be in 2023? ›

“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

What will interest rates be like in 2025 UK? ›

The Bank of England will cut the base rate to 3 per cent by the end of next year and then 2.5 per cent by the end of 2025, according to forecasts. That would be a substantial decline from the current 4.25 per cent but would still represent rates rising like a rocket and falling like a feather.

Will interest go down in 2024? ›

These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.

Will interest rates go down in December 2023? ›

After home financing costs nearly doubled in 2022, some relief is in sight for potential homebuyers in 2023. The interest rate for a 30-year fixed-rate mortgage in the U.S. is expected to drop to 5.25% by the end of this year, according to a forecast by the financial services website Bankrate.


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