Cost of living – latest: Economists predict this week’s interest rates decision

Key points

Will interest rates rise this week and, if so, by how much? Economist predictionsOfgem price cap could fall more than predicted, energy analyst saysAldi to remove use by dates from fresh milkUse our spending calculator to see which prices have gone up or downLive reporting by Andy Hayes

11:21:06 Stairwell with ‘development potential’ for sale in expensive London borough

Fancy living in one of the leafier parts of London but don’t really have the finances?

Well now, with a guide price of just £20,000, you could own a “property” in Twickenham, close to the River Thames and not far from the famous rugby stadium.

A stairwell at the back of some shops is going up for auction tomorrow in the posh-ish part of southwest London.

One bedroom flats are on the market there for £500,000.

Estate agent Barnard Marcus says the stairwell has a long leasehold, “development potential” and “full vacant possession”.

There is also the “right to lay and maintain utility services over the adjoining rear car park”.

There would not be much privacy, however, because the property is clad in glass. 

And were we to get a heatwave this summer, it would be like living in a greenhouse.

10:39:26 Last day to use un-barcoded stamps – and how you can swap them

 Today is your last chance to use stamps without a barcode – with any missing last post this evening set to incur a fee for the recipient.

From 1 August, any item with an old-style stamp will be treated as having insufficient postage and liable for a £1.10 charge.

The changes affect any non-barcoded stamps featuring the late Queen’s profile on a plain background.

Any special stamps with a picture on, or Christmas-themed stamps, can still be used even if they don’t have a barcode.

For those who have a stash lurking in the kitchen drawer, there’s a Royal Mail exchange scheme.

A form needs to be printed from its website – or picked up from a delivery office or Post Office – and the stamps sent to: Freepost SWAP OUT.

There’s currently no deadline on the scheme, but it’s important to note that Post Offices can’t swap the stamps themselves.

Barcoded stamps were introduced in February 2022 and allow people to watch videos, read messages and view other information from senders.

Royal Mail says they also improve efficiency and allow “added security features”.

10:28:39 What are current average mortgage rates?

Average mortgage rates have been on an upward trajectory for months and show no signs of easing.

The average two-year fixed residential mortgage rate is currently 6.81%, Moneyfacts has said.

If you are looking to fix your payments for five years, the rate is almost half a percent lower, at 6.34%.

There is plenty of choice, with 5,029 residential mortgage products currently available, the financial information company said.

If you are interested in a tracker, it puts the average two-year rate at 6.02%. 

The average two-year buy-to-let residential mortgage rate is at 6.89%, with the five-year one at 6.73%. 

What about savers?

If you are prepared to lock in some money for a year, Moneyfacts puts the average savings rate at 5.19%.

For easy access accounts, it is 2.78%.

Turning to ISAs, the average one-year fixed is at 4.98%, with the easy access ISA rate at 2.84%.

09:43:53 Ofgem price cap could fall more than predicted, energy analyst says

Energy market analyst Cornwall Insight is suggesting the Ofgem price cap could fall further than previous predictions have suggested when it is revised in October.

The cap is adjusted every quarter to reflect changes in wholesale prices.

In early July, Cornwall said the cap, which is currently £2,074 a year for households with typical consumption, would fall to £1,878 for the fourth quarter. 

It now says it will drop to £1,861.

The first quarter of next year could see a rise, however, with Cornwall upping its estimate from £1,917 to £1,959.

The same has happened for its estimate for April, which has risen from £1,888 to £1,917.

08:57:35 Aldi to remove use by dates from fresh milk

Discount supermarket Aldi is to remove use by dates from its fresh milk and urge customers to use a “sniff test” instead. 

The German grocer will add best before dates to its packaging at stores in England and Wales instead by the end of the year.

It’s part of an attempt to halve its food waste by 2030.

Almost 300,000 tonnes of milk is wasted by UK households each year because it has not been drunk by the use by date, according to waste reduction charity WRAP.

“We hope shoppers embrace this change and look, smell, and taste their milk to see if it’s still fine to use, so together we can reduce the effect food waste has on the environment,” said Liz Fox, Aldi’s sustainability director.

Last year, the company joined Tesco, Sainsbury’s and M&S in removing best before dates on more than 60 fresh fruit and vegetables.

08:54:06 From today, financial firms must tell you about their best deals – rather than letting you sit on a poorer one

Firms offering financial services need to make sure customers are aware of their best deals under a new “consumer duty” which has come into force today.

Overseen by the Financial Conduct Authority (FCA), it requires companies to put customers’ needs at the heart of what they do. 

“It’s about helping customers, rather than just sitting back,” said Nisha Arora, director of cross-cutting policy and strategy at the FCA.

“In all markets, including in the savings market, the consumer duty will require all products to be fair value.” 

Rocio Concha, from consumer group Which?, said that under the new duty, customers must be given “enough information to make an informed choice and are supported throughout”.

The terms and conditions of insurance policies should be “easy to understand”, she added, banks must alert customers of better savings rates, and “lenders (must) proactively help any mortgage customers in financial difficulty with tailored support”.

Many firms have been making plans to implement the new duty, Ms Arora said.

However, the FCA will be “ready to enforce if we see non-compliance that drives harm, and creates harm, for consumers”, she added.

08:11:17 Will interest rates rise this week and, if so, by how much? Economist predictions

On Thursday we’ll learn whether the Bank rate will rise for the 14th time in a row.

The rate is currently 5% having been raised at every opportunity since the end of 2021 as the Bank of England has sought to slow spending and encourage saving in a bid to control prices/inflation.

This month’s lower than expected inflation figure – it dropped to a still-high 7.9% – means the Bank’s decision is not as clear-cut as might have been anticipated a few weeks ago.

A rise to 5.25%?

An uptick is still expected, with a majority of economists thinking it will be 0.25 percentage points to 5.25%.

“The economy is clearly far too hot for the Monetary Policy Committee to relax,” said Thomas Pugh, economist at the audit company RSM UK. 

He said the slowdown in inflation could “tip the balance” towards a 25 basis point rise.

A bigger rise?

Investec Economics predicts the Bank will opt for a bigger 0.5 percentage point increase, before pushing through a final quarter-point hike in September.

Comments from Dave Ramsden, the only member of the MPC who has spoken publicly since the latest inflation data, don’t suggest he’s in the mood for caution.

He said inflation “remains much too high” and stressed the MPC’s resolve to “address the risk of more persistent strength in domestic wage and price setting”.

Matthew Swannell, economist at BNP Paribas, offered another reason why the MPC might want to act aggressively.

“The BoE only has limited time before it becomes an international outlier,” he said, pointing out that both the Fed and the ECB could have finished raising rates by September.

The Bank of England will not want to be the “last hawk standing”, he said.

Inflation predictions coming down

An issue the Bank could have if it acts aggressively is explaining why, when its own forecasts are likely to show that both GDP and inflation will be weaker in the medium term than it expected in May.

Sterling has strengthened and wholesale gas prices have fallen – pushing inflation forecasts below the 2% target over a two to three year period.

07:35:32 Welcome back to our cost of living live page – as interest rate decision looms

After a week or two where our live reporters have been focusing on wildfires and extreme weather, the cost of living crisis is back on the news agenda as we await the Bank of England’s latest interest rates decision.

The Bank’s Monetary Policy Committee will reveal its decision at midday on Thursday – with a 14th consecutive rise in the Bank rate anticipated.

We’ll have more on that shortly – as well as all the other cost of living news and analysis through the week.

16:06:28 ‘£113bn wiped from nation’s savings in real terms,’ analysis suggests

The rising cost of living has left many of us feeling the pinch in our day to day lives – but also when it comes to preparing for the future.

Analysis by investment platform AJ Bell suggests that as much as £113bn may have been wiped off the value of the nation’s savings in real terms over the past year as a result of rising inflation.

The platform’s head of personal finance Laura Suter says savers are “still being pummelled” despite a slight fall in inflation, as they put up with lower returns on their savings.

“Although interest rates have risen considerably over the past year and a half, savers still lost money in real terms thanks to double-digit inflation for much of that period,” she said.

The average saver with £1,000 in an easy-access account will now find their cash is only worth £938 in today’s money, Ms Suter added.

“Based on the £1.81trn that Brits have in savings accounts, it means the nation’s savings could have collectively lost as much as £113bn over the past year in real terms.”

16:00:01 Is it better to take a fee-free mortgage deal?

The effect of interest rates on mortgage costs is a significant issue on the minds of first-time buyers and those approaching the end of their fix.

But people looking to find a new deal also have to consider the possibility that their policy may come with an upfront fee – a less-discussed aspect of the mortgage-hunting process.

Analysis by consumer champion Which? found that six in 10 fixed-rate and tracker mortgages on the market now come with product fees – with the highest charge sitting at a whopping £3,999 set by Halifax.

The average fee tends to hover around the £999 mark- and high fees can sometimes disguise attractive rates, so make sure you go through all the details with your mortgage broker.

Which? says mortgages with a higher loan-to-value level are more likely to be offered without a fee in a bid to attract first-time-buyers with less money to spare.

Analysts at the consumer champion have compiled this table which shows how much someone would pay over two years, on a £200,000 mortgage fixed to a 25-year term, in different scenarios:

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