Andy Burnham, who recently assumed office as the United Kingdom’s prime minister, faces immediate challenges related to the rising cost of living amid ongoing economic pressures. With interest rates expected to increase and geopolitical tensions in the Middle East contributing to higher global energy prices, Burnham and his new chancellor, John Healey, are under pressure to develop effective strategies to ease financial burdens for households.

Mortgage rates have already seen increases this month from major lenders including Santander, Barclays, and Natwest, with some banks raising rates by up to 0.2 percentage points. For a typical £200,000 mortgage over 25 years, this translates to an additional £23 per month, or roughly £276 annually. Industry experts advise those with mortgage deals expiring within six months to secure new fixed-rate agreements promptly to shield themselves from further rises. Fixed rates offer protection despite potential fluctuations before completion, and removing some debt to lower the loan-to-value ratio may also secure more favorable terms.

For renters and younger workers, energy costs remain a significant concern. Although Burnham has announced a VAT exemption on electricity bills starting in October—which could save households about £45 annually—energy prices are anticipated to climb further this winter due to the conflict in the Middle East driving oil prices higher. Most households still subscribe to standard variable energy tariffs, which tend to be more expensive. Switching to fixed-rate energy deals, some of which are currently available below the price cap, could save an average family upwards of £200 a year. Consumers are encouraged to review other household expenses as well, such as broadband and mobile phone plans, where switching deals or opting for SIM-only contracts could reduce annual costs by several hundred pounds.

Near-retirees might consider purchasing annuities, which convert pension savings into a steady income stream. Recent increases in gilt yields, continuing beyond five percent, have made annuities more attractive, though some warn that rates could decline if the Bank of England changes its policy stance. Index-linked annuities, which adjust payments based on inflation, offer a potential safeguard against the rising cost of living.

Savers may benefit from an environment of higher interest rates, though it remains important for returns to outpace inflation to preserve purchasing power. Digital banks and lesser-known providers often offer competitive rates, such as Cahoot’s five percent on easy-access accounts and Marcus offering 4.9 percent for fixed terms. Automated savings platforms and regular savings accounts, including offers from Santander, also provide reliable opportunities to earn interest. Utilizing Cash ISAs can protect savings from tax liabilities.

For those carrying credit card balances or other variable-rate debt, financial advisers recommend reducing these liabilities quickly or switching to fixed-rate products where possible. Variable credit card interest rates remain high and can increase further with expected rate hikes by the Bank of England, raising the risk of escalating debt.

As the government formulates its response, households across the UK are encouraged to review their financial commitments and consider proactive steps to mitigate the impact of rising costs amid ongoing economic uncertainties.