STORM clouds are already gathering even though Andy Burnham has barely got his feet under the table at No10.

The new PM has committed to tackling the cost of living — but with interest rates set to rise and the Iran War continuing to push up costs, he and new Chancellor John Healey have their work cut out.

Brits from all walks of life are battling to protect their money from the cost of living and rising interest rates Credit: Getty

New chancellor John Healey has his work cut out with economists forecasting a bumpy path ahead Credit: Getty

Major lenders are already pushing up their mortgage rates and, while inflation has dipped, economists see a bumpy path ahead.

Markets are already pricing in two hikes to the Bank of England base rate by March next year which would take it to 4.25 per cent.

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Households can expect to save £45 a year from VAT coming off energy bills, but many are still bracing for an energy shock this winter as the cost of oil continues to climb.

While Burnham and his Cabinet work out their plan, EMILY MEE tells you what to do now to protect yourself from rising costs . . . 

HOUSE THAT
5m homeowners face higher mortgage bills – how much YOUR repayments could rocket

ALL CHANGE
What John Healey as Chancellor means for your money – from energy bills to tax

MORTGAGE HOLDERS

YOUR mortgage is likely to be the biggest bill for most households, so it’s vital that you keep on top of the rate.

Mortgage rates had been steadily increasing but fresh conflict in the Middle East has caused sharper hikes.

Santander, Barclays and Natwest are among the lenders that pushed up their rates this week, by as much as 0.2 per cent, which on a typical £200,000 mortgage over 25 years will add around £23 a month — £276 a year.

If your current deal is ending in the next six months, you should try to fix a new rate NOW.

David Hollingworth, associate director at L&C Mortgages, says this will give you “ample time to get the best available deal and lock into a new product”.

He added: “That will secure the rate now and protect against any further increases if fixed rates continue to climb, but still allows for another review before completing the new deal.”

Remember, if rates improve before your mortgage completes you will usually still be able to switch on to a lower rate even once locked in.

Nicholas Mendes, mortgage technical adviser at John Charcol, suggests trying to bring your loan-to-value down — the value of your property compared to how much you need to borrow.

Santander, Barclays and Natwest are among the lenders that pushed up their rates this week Credit: Alamy

Energy bills are expected to jump later this year as the Middle East conflict is expected to push up oil prices Credit: PA

Lenders price mortgages in bands, and the lower the band, the cheaper the rate. “That might mean using savings to clear a chunk of the balance before remortgaging, though keep an emergency buffer,” Nicholas says.

“Check the lender’s current valuation of your home too, as house price growth may have moved you into a lower band without you spending a penny.”

If you’re on a tracker mortgage, you should look to fix or “you’re going to be walloped with extra costs,” says Sarah Coles, head of personal finance at AJ Bell.

RENTERS AND YOUNG WORKERS

IF you’re renting, you might think household bills are out of your hands.

But if your name is on the bill, the choice of supplier is yours and switching to a cheaper tariff could save you hundreds a year.

Energy bills are one of the biggest expenses for households, with the average family currently paying out around £1,663 a year.

Andy Burnham has announced he will take VAT off electricity from October, saving around £45 a year.

But energy bills are expected to jump later this year as the Middle East conflict is expected to push up oil prices within days.

Sabrina Hoque, expert at Uswitch.com, says: “Around six in ten households are still sitting on a standard variable energy tariff, paying over the odds.

“While recent news of a VAT cut on electricity bills is welcome, current forecasts point to even higher rates this winter, so getting off this type of tariff and locking in a fixed deal is the best protection against future increases.”

There are currently 23 fixed deals cheaper than the July price cap, with the best saving a typical household £210 a year.

Just remember to check whether you have an exit fee to pay if you switch.

If you’re nearing retirement, you might consider an annuity — using your pension to buy a fixed income for life Credit: Alamy

Andy Burnham has announced he will take VAT off electricity from October, saving around £45 a year Credit: Getty

It usually works out cheaper to pay by direct debit rather than when the bill arrives, and submitting regular meter readings — or getting a smart meter installed — means you will only pay for the energy you actually use.

At the same time, checking broadband and mobile deals can save the average household £329 a year, according to Uswitch.

“If you’ve paid off your handset, moving to a SIM-only deal is one of the simplest ways to slash your monthly mobile bill,” Sabrina says.

RETIREES

IF you’re nearing retirement, you might consider an annuity — using your pension to buy a fixed income for life, removing the risk of your savings running dry.

Rates in the annuity market are currently high. Ten-year gilt yields rose above five per cent after Andy Burnham became PM.

Rachel says: “Higher interest rates and higher gilt yields typically fuel higher annuity incomes, making them more attractive to retirement savers than they were even just a few years ago.”

Rates could begin to lower if the Bank of England shifts its strategy, so it’s worth moving fairly quickly.

George Sweeney, personal finance expert at Finder, said: “One option is index-linked annuities that can rise in line with an inflation measure.”

SAVERS

INTEREST rates are likely to be higher for longer, which is good news for savers, but your rate needs to outpace inflation.

Mr Sweeney adds: “Don’t shy away from lesser-known digital providers as they often have the best deals.”

Cahoot pays five per cent interest on up to £3,000 for 12 months on its easy access pot. For fixed terms, Marcus (part of Goldman Sachs) now offers 4.9 per cent.

Rachel Springall, of Moneyfacts-compare.co.uk, recommends an automated savings account, such as Plum.

A regular savings account can also pay highly competitive rates — Santander pays eight per cent on up to £200 a month for 12 months. Consider a Cash ISA too, to protect your returns from tax.

CREDIT CARD SPENDER

ANYONE with variable-rate debt should consider fixing so they don’t get caught out if the Bank of England raises rates.

Variable-rate credit card debt should be paid down as a priority, says Sarah Coles, head of personal finance at AJ Bell — it’s not just variable, it’s sky-high, making it far harder to escape a debt trap.