Very few are immune from the cost-of-living crisis, but it is the lowest income households feeling it the most, as new research from interactive investor lays bare.
interactive investor, the UK’s second largest investment platform for private investors, calculates that low-income households face spending a third (33%) more on household costs, compared to last year, from next month.
While the nation awaits news on support packages, this is how the numbers are stacking up at the moment, based on the energy price cap effective from October.
Middle income households could spend a fifth more (20%), and high earning households are looking at a 14% hike in costs. That’s based on a medium sized home and is an estimate for the average household using official data.
interactive investor analysed data from Ofgem’s latest energy price cap effective from 1 October, together with the latest ONS Family Spending survey and the latest ONS inflation figures*.
The poorest households living in big homes face a 47% rise in household costs once the 80% hike in the energy price cap takes effect from October. This compares to 26% and 17% for middle- and high-income earners living in a large property, respectively.
The uptick in household costs is mainly driven by the 178% increase in the energy price cap from £1,277 in October 2021 to £3,549 from this October. Food inflation and the rising cost of transport are among the other contributing factors.
For consumers living in a small property, low-income households face a 22% increase in costs, in contrast to 14% for middle income household and 11% for high income households.
|Cost increases||Household: low income||Household: middle income||Household: high income|
Sources: ONS family spending survey, ONS inflation figures, Ofgem price cap. Calculations by interactive investor.
Alice Guy, Personal Finance Expert, interactive investor, says: “The poorest households will be hardest hit by crushing energy bills this winter as they spend a larger proportion of their budget on essentials like energy and food.
“The poorest 10% of households are facing a 33% increase in their household costs, mainly caused by a nearly threefold increase in energy bills since last winter.
“Some poorer families will pay even more than the standard energy price cap. Poor families living in bigger homes are staring down the barrel of a 47% rise in household costs, with energy eating up nearly half their household budget.
“With unaffordable bills, many households are facing a frightening winter. Poorer households have already cut budgets to the bone, and they may turn to drastic measures, like turning off the heating.
“In contrast, the richest 10% of households will see a 14% increase in their bills. They have more disposable income and can often move money around by reducing other discretionary spending.”