Episode 403 - On this week's show I discuss why our energy bills aren't dropping even as wholesale gas prices continue to tumble. I explain if and when energy bills are likely to fall and how much you are likely to be paying for the rest of 2023 and next winter. I then discuss the outlook for mortgage rates and look at how much more those looking to remortgage will have to pay each month. Finally, Andy discusses the cheapest airport lounges in the UK.
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Transcript highlights - Episode 403
Outlook for energy bills in 2023
- Gas and electricity prices are linked, with electricity prices heavily influenced by gas prices.
- Currently, the wholesale gas price is around £2 per therm, which is lower than it was in August 2022 (when it was almost £6 per therm) but still higher than it was before the Ukraine war broke out. In 2021 the wholesale gas price was only 65p per therm.
- While wholesale gas prices have fallen in recent months, there will be a delay in the price reduction being reflected in household bills due to energy companies buying energy in advance.
- In addition, OFGEM's energy price cap (EPC) and the Government's Energy Price Guarantee (EPC) dictate household energy bills at present, reducing the average household bill well below the level they would otherwise be at if they truly reflected the movement in wholesale energy prices.
- Therefore the wholesale price of energy needs to continue to fall further in order for household bills to reduce below the level of the (EPG) in the future.
- Based upon predictions from energy consultancy firm Cornwall Insight, OFGEM's EPC will drop below that of the EPG later this year meaning that consumers' energy bills will only be approximately 10% cheaper than they currently are, assuming that the wholesale price of energy continues to decline.
Outlook for mortgage rates in 2023
- The Bank of England (BOE) increased the base rate from 3.5% to 4%, which is a 14 year high, pushing up the cost of tracker and variable rate mortgages.
- The interest rates on fixed rate mortgages also take into account the market's expectation of where the BOE base rate will be in the future, as well as UK gilt yields
- In the wake of the infamous mini-Budget in September 2022 the market had predicted that the base rate could go up to 6% in 2023. This has now changed and the market expects a small rate hike in the BOE base rate to a peak of around 4.25-4.4% by July 2023 before it starts falling over the next few years. Hitting a low of 3% in five years.
- The average two year fixed mortgage rate in February 2021 was 2.44%, but increased to 5.8% in January 2023. The best rate at the moment is around 4.5%.
- The average five year fixed mortgage rate has dropped to 5.2% from 5.63%, and the best rate currently is just over 4.1%.
- When you come to remortgage an increase of 1% in your mortgage rate results in an increase in your mortgage repayments of £50 pounds per month for every £100,000 borrowed.
Cheapest airport lounges
- Airport lounges are not only for business class travellers, but can be cost effective for travellers with a family.
- Access to airport lounges typically includes unlimited food, drinks (sometimes alcoholic), comfortable seating, plug points, and in some cases, showers and games rooms.
- Example costs of accessing airport lounges in the UK:
- Belfast George Best: £22.99 for an adult, £18.49 for a child
- Glasgow International: £27 for an adult, £19 for a child
- Liverpool John Lennon: £31.99 for an adult, £18.49 for a child
- Gatwick Gateway Lounge: £28.99 for an adult, £20 for a child
- Gatwick Aspire Lounge: £29.50 for an adult, £18.49 for a child
- Heathrow Terminal 3 Aspire Lounge: £35 for an adult, £20 for a child
- Heathrow Terminal 5 Aspire Lounge: £40 for an adult, £20 for a child
- Manchester International (Escape Lounge): £28.99 for an adult, £18.99 for a child
- Newcastle Aspire Lounge: £34.99 for an adult, £18.99 for a child
- Southampton Spitfire Lounge: £21.50 for an adult, same price for a child
- Family travellers should calculate the cost of food, drinks, and entertainment at the airport to determine if accessing a lounge is cost effective.
- For frequent travellers, annual memberships are available through Priority Pass, with three different packages at £69, £99, and £159. Priority Pass covers 1,300 lounges worldwide.