Households could find themselves paying hundreds of pounds a year more for bills linked to the Consumer Price Index inflation measure, This is Money and uSwitch research indicates.
Written into most broadband, mobile phone and TV package contracts is the ability for the provider to hike prices in March by the January CPI figure plus 3.9 per cent.
With inflation soaring to to 4.2 per cent in the latest set of figures, that would mean a meaty 8.1 per cent rise for each contract – and depending on how many people are in a household with a separate mobile phone, this could add hundreds to annual bills.
Furthermore, the energy price cap is set to rise substantially next year, with the next price cap coming into play in April 2022 which is likely to be set at least £300 higher than its current level.
Bill shock: Households could see their mobile, broadband and TV deals increase substantially next year if CPI remains at a decade-high
Yesterday marked the highest level of inflation in a decade, driven by supply chain chaos, labour shortages and surges in energy costs.
In contrast, CPI was 0.9 per cent in January 2020 and 1.8 per cent in January 2019, meaning bill rises of 4.8 and 5.7 per cent respectively.
Steven Cameron, pensions director at Aegon, said: ‘Following a dip in September, driven in part by the recovery of restaurant prices following the “eat out to help out scheme”, CPI continued its upward path soaring to 4.2 per cent in the 12 months to October, driven by rising energy prices and supply chain issues.
‘With rising prices, consumers should consciously think about what products and services they are buying as the value of the money in their pocket becomes increasingly threatened.
‘Any festive cheer of a boost to purchasing power looks unlikely in the lead up to the period where incomes are at their most stretched.
‘Borrowers, and particularly those who may have emerged from the pandemic in debt, will feel the squeeze on their finances even more so, during what is already a challenging time of year for many households.’
Hike: The CPI rate of inflation has soared to 4.2% today, increasing from 3.1% in September
This is Money, with the help of Uswitch, has broken down how much more customers could be expected to pay in the new year, depending on if the CPI was 3 per cent or 4 per cent.
If a customers’ mobile deal, TV package and broadband came to £100 a month, this would mean an extra £6.90 or £7.90 spent a month – equivalent to an additional £82.80 or £94.80 per year.
And it is likely that some households have monthly bills linked to broadband, mobile and TV packages that are far higher than this.
This is on top of other bills such as energy, which is also expected to increase by hundreds of pounds a year for millions in April when the price cap is reviewed and council tax, which is set to rise substantially from next year too.
For broadband, uSwitch put the average monthly bill as £26.90, £36.50 for a monthly mobile and £14.82 for a Pay TV service – a total of £79.22.
If CPI was at 3 per cent, the annual increase for broadband, for those with BT, would be £22.27.
If it were to rise to 4 per cent, the annual hike would be £25.50.
Meanwhile, for a mobile handset contract, an annual increase would typically be £31.05 for those with EE and Vodafone or £20.25.
However, Three customers would see a lower increase of 4.5 per cent, equivalent to £14.53, as it doesn’t link its hike to CPI.
Customers on a Pay TV plan could also see their annual bills increase by £12.27. In total, this would mean customers are paying an extra £65.59 every year.
However, bills could be even higher if CPI is 4 per cent.
In fact, broadband could increase by £25.50 a year, mobile bills could be hiked by £35.55 annually and a pay TV plan could rise by £14.05, totalling an extra £75.10 spent each year.
This is a guide and prices can be even higher depending on how much you’re paying on your contract, and how many you have.
|If CPI = 3%||If CPI = 4%|
|Item||Average monthly bill||Annual increase under BT/EE (CPI + 3.9%)||Annual increase under Vodafone (CPI + 3.9%)||Annual increase under Three (4.5%)||Annual increase under BT/EE (CPI + 3.9%)||Annual increase under Vodafone (CPI + 3.9%)||Annual increase under Three (4.5%)|
|Broadband (average in contract: Uswitch data)||£26.90||£22.27||£22.27||£14.53||£25.50||£25.50||£14.53|
|Mobile (With handset: Uswitch data)||£37.50||£31.05||£31.05||£20.25||£35.55||£35.55||£20.25|
|Pay TV (as part of a triple play package) (Ofcom data)||£14.82||£12.27||£12.27||£8.00||£14.05||£14.05||£8.00|
|Total (Broadband, mobile with handset, and pay TV)||£79.22||£65.59||£65.59||£42.78||£75.10||£75.10||£42.78|
|Source: Uswitch.com (prices correct as of 15 November)|
Ernest Doku, telecoms expert at Uswitch, said: ‘Millions of mobile customers have got used to seeing their bills rise mid-contract, and broadband providers are now following the trend.
‘Many providers calculate their increases by taking the consumer prices index and adding on a set amount – 3.9 per cent for BT, EE and Vodafone last year.
‘This meant that last year many consumers saw their prices rise by 4.5 per cent at a time when inflation was only one per cent.
‘This year inflation is expected to be a lot higher, meaning the increases coming in April could be a lot more dramatic.
‘If CPI hits 4 per cent, some users could see the bill for their mobile, broadband and pay TV increase by 7.9 per cent – equal to more than £75 a year.’
Can customers avoid the price hike?
Experts have advised customers there are steps they can take to avoid price hikes before next year.
Lisa Barber, Which? home products and services editor, said: ‘Price hikes will be the last thing anyone wants to see next year, especially as many households will already be feeling the crunch of rising costs and shortages.
‘There are ways to bring household bills down before prices go up. With mobile, broadband, and TV packages, you will need to check if you are out of contract or if it’s ending soon.
‘That way you can haggle for a better deal or switch away and still save money if your service isn’t up to scratch.’
Doku added: ‘Ofcom’s rules against unfair price rises mean that consumers can leave penalty free if there is an unexpected increase to their monthly deal, but providers have argued they made things clear by writing such increases into contracts.
‘Given the majority of telecoms providers are now using this tactic to prevent their customers from walking away from their contracts when prices go up, consumers have little choice but to accept this practice.
‘What’s frustrating for customers is that in other sectors, such as energy and insurance, the price you sign up for doesn’t increase until the deal ends – it’s a case of fixed price as well as fixed term.’
It is likely other bills will also increase around the same time next year including NHS prescriptions, car tax, water bills and council tax, while petrol prices are currently at record highs.
Meanwhile, a change in National Insurance will see workers pay 1.25p more in the pound from April 2022. All of the above could see incomes squeezed hard next year.