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Brits struggle to cut back as inflation eats into budgets 

Ofgem Price Cap Announcement
Over one in 10 households will have nothing else to slash from their budgets when the October energy price cap hike lands, according to a survey by Legal and General (Photo illustration by Christopher Furlong/Getty Images)

Brits are struggling to find any more areas of spending to cut back on to keep their finances above water, a new survey published today reveals.

Over one in 10 households will have nothing else to slash from their budgets when the October energy price cap hike lands, according to a survey by Legal and General.

The fresh data illustrates the intense pressure the cost of living crunch is putting on household finances.

Wage growth is failing to keep pace with prices accelerating 9.4 per cent over the last year, the quickest rise since 1982, meaning Brits are unable to buy the same quantity or quality of goods and services as last year.

Nigel Wilson, chief executive of Legal and General, said: “Many households across the UK are currently facing very tough financial choices. For some, those choices seem impossible.” 

Londoners are the most confident in the UK about maintaining their current lifestyle this year, mainly driven by a large proportion of the country’s top earners living in the capital.

Nearly a third of households with income less than £20,000 will be unable to cope with a rise in energy bills.

The cap on energy bills could rise more than 60 per cent in October, taking the average annual bill to more than £3,000.

The grip on budgets is threatening to push the UK economy into recession, driven by Brits slashing spending.

Distress in the property market is emerging. Nearly half of the 20,000 people Legal and General surveyed are worried about keeping up with their mortgage payments over the next year.

The Bank of England has raised interest rates five times in a row to 13-year high 1.25 per cent. They are expected to hike them 50 basis points on Thursday, the steepest increase in nearly 30 years, to tame inflation.

While a greater proportion of homeowners have longer-term mortgages, they are likely to have to pay higher rates when they re-mortgage. 

People on floating mortgages are more exposed to a jump in interest payments when the Bank raises borrowing costs.