Households could see their fuel bills cost more than their mortgage payments next year as energy prices escalate, experts have have warned.

Many people are set to see their disposable incomes shrink significantly in the new year with some seeing the cost of their utility bills catching up with, or overtaking, their mortgage.

The energy price cap set by the energy market regulator Ofgem could spike by as much as £6,823 per year for the average household from next April, according to the latest forecast by energy consultancy Auxilion, which amounts to about £569 a month.

In comparison, the average bill in October 2021 was £1,400 a year.

Homeowners with fixed-rate mortgages in the UK pay £741 a month on average, according to the latest data from trade body UK Finance, compiled in December.  But in Scotland where average mortgage payments are cheaper as are the houses.

That means homeowners could see just a £172 difference in the cost of paying their mortgage and heating their home.

For those with a standard variable rate (SVR) mortgage, the figures are even starker.

The average SVR mortgage monthly repayment, which borrowers can be transferred to once their fixed or tracker mortgage deal comes to an end, amounts to £516, UK Finance said.

That means that some households could end up paying £53 more on their utility bills than their mortgage as runaway energy prices overtake the cost of owning a home.

Meanwhile, people tied to a tracker mortgage, which directly track the Bank of England’s base rate, will see around £50 added to their typical costs, according to calculations by the trade body.

But even the cost of mortgages is now expected to go up even higher with the Bank of England predicted to raise interest rates to 4% from as early as next year to combat soaring inflation, despite the growing risk of recession amid the cost of living crisis.

City traders are forecasting that the central bank will more than double the cost of borrowing from 1.75% in response to inflation at the highest levels for more than 40 years.

Renters too are set to face even more drastic mounting costs amid the cost-of-living crisis.

In Scotland rents have soared by up to 25% in a year in some parts.

The Herald:

New analysis has shown that high demand and low supply have pushed up Scottish rents on average by 10% in a year at the end of June to an all time high of £970 a month.

The residential estate agency Citylets has said it is reasonable to assume on the current trajectory the average property to rent in Scotland will soon exceed £1000 for the first time.

But the Citylets study of rents for April to June reveals the biggest rent rises in Scotland's four major cities have come in Dundee where a three bedroom property now costs £1,078 a month - a rise of 24.5%.

The base rate is expected to finish the year above 3% and could peak at close to 4.1% in June 2023, based on interest-rate derivatives linked to the meeting dates of Threadneedle Street’s monetary policy committee. The Bank is then expected to cut rates close to 3.8% by the end of next year amid expectations of fading inflationary pressures and a lengthy recession.

The triple whammy of rising food costs, soaring energy bills and rising mortgage costs is expected to hit middle-income household hard in the months ahead.

Several high street banks have set aside hundreds of millions of pounds to prepare for an increase in customers defaulting on their loan repayments.

Lloyds Banking Group said it had put aside £377 million to cover loan losses, while Barclays reported it set aside £341 million in July as the economic outlook worsened.

Charities have warned that many people could face hardship during the colder months of the year when they may be forced to choose between “eating or heating”.

Citizens Advice Scotland said in advance of today's price cap announcement, which is expected to see energy bills soar to £3600 per year said there should be no further increases in the price cap.

Citizens Advice Scotland chief executive Derek Mitchell said: "People will be awaiting today’s announcement with a feeling of dread in the pit of their stomach.

“CABs are on the frontline of this cost of living crisis and what they are seeing is increasing amounts of people hanging on by their fingertips. They cannot afford another huge increase in bills.

“The Citizens Advice network is already seeing increased demand for, and a direct link between, food insecurity advice and energy advice. It’s the summer time, what are people supposed to do when temperatures drop but bills keep rising? People will freeze or starve without urgent help.

“We need to see a pandemic level response from government. That means targeted support for the most vulnerable people and for advice services like CABs.”

Sister organisation Citizens Advice said that a quarter of people in the UK will not be able to afford to pay their energy bills in October based on current forecasts, jumping to a third of people in January when prices will soar higher.

It said its analysis took into account the energy rebate and cost-of-living payments offered by the Government, showing that the support on offer does not go far enough to protect households from spiralling costs.

Dame Clare Moriarty, chief executive of Citizens Advice, said: “Every single day at Citizens Advice we’re already helping people in the most heart-breaking circumstances, trying to scrape together enough to feed their kids and keep the lights on. This will get far, far worse unless the Government acts.

“It’s becoming increasingly clear that skyrocketing prices will swallow up all of the help that has been announced so far.”

Furthermore, disability charity Scope said that disabled people are likely to be harder hit when October’s energy price hikes come into force.

“Scope has been inundated with calls from disabled people who have been forced to make dire cutbacks on personal care, hygiene, food and energy because of rampaging inflation,” said Tom Marsland, policy manager at Scope.

“This is having a devastating impact on disabled people’s lives, and the support from Government just won’t touch the side.”

Scope said it had heard from people who are forced to stop heating their homes to power lifesaving equipment and others who are skipping meals so their children can eat, the charity said.

It also noted that referrals to its disability energy support service had increased five-fold between February and July, compared to the same period last year, partly because of rising costs.