Top tips to fight inflation

6 min | 18 October 2021

The Chase team

With energy costs on the rise and inflation predicted to reach 4% by Christmas, things may seem bleak. Thankfully, there are steps you can take to reduce the effect of rising inflation on your personal finances.

Inflation, or the rate at which prices are rising, is a hot topic. There's no way to get around rising inflation, but there are things that can be done to help.

While the government’s target is to keep inflation at 2%, the latest figures (Opens in new window) from the Office of National Statistics show that the Consumer Prices Index (CPI) increased by 3.2% in the year to August, up from 2.0% in July 2020.

The rate of inflation is predicted to increase to over 4% by the end of the year, with rising energy costs just one contributing factor.

How does inflation affect me?

In simple terms, inflation hitting 4% in 2022 would mean everything will cost 4% more than a year ago – adding 10p to a £2.65 latte, for example, or £200 to a £5,000 sofa. The average UK household expenditure is £2,548 a month - which could add £101.92 to their overheads every month. 

To keep up with predicted inflation, you'd need a 4% pay rise, after tax. Or your savings would need to be earning at least 4% interest. But with interest rates at 0.1% and the typical interest rate paid on new deposits down to a new low of 0.29%, things don’t balance out.  

What can I do to prepare for rising inflation?

While there’s nothing you can do to prevent inflation, you may be able to soften the blow by switching to fixed lower rates on things such as mortgages, utility, broadband and mobile phone packages before inflation rises.

Where you can’t fix prices, such as food, eating out or clothing, reduce spending when you can or go for less expensive brands on those items. Don’t forget your bank or credit card provider may offer cashback or discounts with certain retailers.

What rates can I fix?

  1. Fix your mortgage rate
    If you currently have a tracker or variable rate mortgage that’s coming to the end of its term, now may be the time to consider switching to a fixed-rate deal.

    With interest rates currently so low, you could find a fixed rate deal that would reduce your monthly payments, especially if your home has increased in value and your loan-to-value (Opens in new window) (LTV) ratio means you now own more equity. Plus, with a fixed rate you’ll have the peace of mind of knowing exactly how much you will pay each month. However, you should not solely focus on the rate. You should also consider the initial product fee and whether you might lose any features on your existing deal if you switch and fixed-rate mortgages generally have early repayment charges and limited overpayments permitted.
  2. Lock in a good savings rate
    ... or consider a fixed rate bond (such as one year) that pays more than instant access. Don’t let inflation eat away at your savings ー especially if you rely on them for your income. Check the rate you are earning and consider moving your money to a more competitive account.

    Alternatively, using your Cash ISA allowance means your money will grow tax-free, both now and in the future.

    If you haven’t already, why not consider opening a Lifetime ISA (LISA), which can be opened by anyone aged between 18 and 39 in the UK. You can save up to £4,000 a year, which could go towards your first home or retirement. Plus, the government adds a cash bonus of up to £1,000 a year on top – tax-free!
  3. Keep tabs on your utility bills and shop for a low fixed rate
    Gas, electricity and water companies routinely estimate customers’ usage and increase their direct debits to cover potential future costs. While this can be sensible to prepare for colder months, it can sometimes mean they are holding onto unreasonably large sums of customers’ cash.

    It’s worth taking a meter reading and check with your supplier(s) that your direct debit is appropriate. You can ask for your payments to be reduced and any excess held transferred back to you.

Cut spending where you can

  1. Cancel old or out-of-use direct debits
    Check your bank account to see if all your direct debits are still relevant – if you are paying for subscriptions, apps, services or memberships you no longer use, cancel the direct debit.
  2. Reduce your bills
    You may be spending more than you need to. By checking over your bank statements, you can spot spikes in spending or direct debit payments (e.g. water or heating bills).

    Fitting a water meter could save you money because you will only pay for the amount of water you use, rather than paying a fixed rate. Meters also keep us mindful of water usage. There may even be free water saving devices available to you through your water company.

    Another way to cut back on bills is to look into your broadband and TV subscription package, especially if you signed up to them years ago. You could be overpaying if your initial deal has reverted to the provider’s standard rate. A quick call could result in you paying far less for a bundled media and mobile package.

    Consider carpooling to work and on school runs to further cut down on transport costs. If the UK experiences prolonged fuel shortages at stations as we saw in September, carpooling may be your only option.

What do I do if my energy supplier has gone out of business?

Switching gas or energy suppliers for a competitive deal is a great way to save money, so you should always comparison shop every year. But what if there is talk of your supplier going bust? The good news is that independent energy regulator Ofgem (Opens in new window) promises that customers of failed companies will be automatically moved to a new supplier and protected by the Energy Price Cap (Opens in new window), with any built-up credit added to the new account.


  • Article dated 30 March 2021 "The Average UK Household budget"

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