Ofgem has announced that, from 1st July to 30th September, the price for energy for a typical household that uses electricity and gas and pays by Direct Debit, will go down to £1,568 per year.
This is £122 per year lower than the price cap set from 1st April to 30th June 2024, which was at £1,690.
Newspage asked brokers if this will have an impact on affordability and improve things for borrowers. Their views are below.
Reaction:
Justin Moy, managing director at EHF Mortgages:
“The saving of just over £10 a month on the average bill will do little to reignite the mortgage world.
“At best, it will mean about an extra £500 of mortgage lending if lenders do decide to pass on that saving within their affordability assessment.
“It’s a small win, unfortunately, and nothing more.”
Michelle Lawson, director at Lawson Financial:
“As lenders generally use ONS data, this new cap will be factored into mortgage affordability. But let’s face it, such a small drop in a big ocean is likely to have little overall impact.
“Though it’s not a huge result for borrowers, it’s a tiny step in the right direction. What the mortgage and property markets need is a cut to the base rate.”
Riz Malik, director at R3 Mortgages:
“Energy price cuts, especially with a potential rate cut on the horizon after this morning’s dire retail sales data, will definitely start to bring back the feel good factor.
“Those with more money in their pockets will start to reconsider their future plans, which could include moving. Every penny counts in the current climate.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“The reduction in the energy price cap will have minimal impact on mortgage affordability, as lenders tend to use their own assumed figures based on average bills, usually on historical data.
“Only a base rate reduction will provide enough impact to leave a mark. Anything else is tinkering.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“Though these changes to the energy price cap may not have a huge impact on mortgage affordability, they do have the potential to improve household disposable income and slightly boost the feel-good factor among borrowers.
“Reducing costs, lower inflation and potential rate cuts may be the incentive people need to make the move from rented to owning. More disposable income will also help those saving for deposits.”
Dariusz Karpowicz, director at Albion Financial Advice:
“This is a step in the right direction, but we in the UK still pay some of the highest rates for electricity in Europe.
“While the reduction to £1568 per year for energy costs is helpful, we still need additional measures to make living in the UK more affordable.
“This decrease will certainly ease some financial pressure on households and improve affordability for borrowers, but broader economic reforms are necessary to sustain this positive momentum.”
Benjamin Blyth, director at Houz Mortgages:
“People, of course, will spend less on one category of expenditure to allow more budget for another.
“In terms of a lender’s view, the answer very much relies on what datasets they are working to and when they are updated.
“So until the next round of ONS figures are issued it’s unlikely to have an impact.
“And even then, it depends how often lenders track these statistics and implement changes.”
