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Cost of living – frequently asked questions
To help you navigate the rising cost of living, we’ve answered some commonly asked questions. We understand you may be worried about:
- Managing household bills.
- The effect of higher interest rates.
Find helpful answers and links below.
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There’s no single reason the cost of living is rising, but factors include:
- Worldwide demand for oil and gas to power homes, manufacturing and distribution.
- Social and economic upheaval following the coronavirus pandemic.
- The war in Ukraine reducing the availability of fuel and grain.
- Political and economic uncertainty.
All of this can affect your everyday costs, from groceries to household bills. Because wages haven’t risen to match, things naturally feel less comfortable than they did.
Inflation is likely to peak at a certain point, but that doesn’t mean prices will go down. It could just slow the pace of future increases.
To help you budget and borrow more effectively over the coming months, you might like to explore our money management guides.
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The Bank of England defines inflation as:
‘The term we use to describe rising prices. How quickly prices go up is called the rate of inflation.’
While inflation is high, the faster prices and the overall cost of living will increase.
The buying power of your savings will also go down – if you spent that money, it wouldn’t go as far as it did. Read our inflation guide to learn more and calculate the impact.
That said, inflation can increase the interest rate you earn on savings.
Measuring the rate of inflation
The Office of National Statistics (ONS) monitors the cost of over 700 goods and services which consumers commonly put into their shopping ‘basket.’
This is updated monthly, creating a Consumer Prices Index (CPI). The change in price over the course of a year gives us the rate of inflation.
Managing inflation
The Bank of England aims to keep the rate of inflation stable, at around 2% each year, although it’s currently much higher than that.
The main way to control inflation is through interest. That’s the amount of money you pay when you borrow, or earn when you save.
When interest rates are high:
- People are encouraged to save by earning more interest.
- It costs more to borrow, meaning people tend to spend less.
- Inflation drops and price rises start to slow.
When interest rates are low:
- There’s less incentive to save money.
- Borrowing is cheaper, so people are likely to spend more.
- The rate of inflation starts to rise.
While the rate of inflation is high, your money won't stretch as far, so it’s important to budget and borrow carefully. Explore our money management guides.
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Struggling with your payments?
If you’re struggling to manage your overdraft, it’s important to get support as soon as possible. We’re by your side – find out how we can help.
An arranged overdraft can be useful as a short-term safety-net, helping you to manage unexpected bills, or keep your cashflow going until pay-day.
Just be aware you could be charged daily interest, as detailed in the terms and conditions of your current account.
Short-term borrowing
If you use your overdraft, we won’t charge you any interest if you bring your account back into credit by the end of the same day. You can do that by moving money from another account, or paying money in at a branch.
Longer-term borrowing
An overdraft may not be the most cost-effective way to borrow over an extended period. You can get an idea about the costs using our overdraft calculator.
If you need to borrow money, you might like to explore other borrowing options.
Managing your overdraft
You can manage most things online using Internet Banking or the Mobile Banking app, including:
- Changing your overdraft limit.
- Cancelling an arranged overdraft you’re not using.
To access support:
- Internet Banking: From the account menu select ‘Need help with your debt or payments?’.
- Mobile Banking app: Log on to the app, then use the three dots ‘More’ menu to find ‘Need help with your debt or payments?'.
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Struggling with your payments?
If you’re struggling to manage your credit card payments, it’s important to get support as soon as possible. We’re by your side – find out how we can help.
While there’s an outstanding balance on your credit card account, you need to make at least the minimum payment each month.
By making payments on time, you’ll avoid:
- Extra fees and charges.
- Losing any promotional interest rates.
- Any negative impact to your credit score.
To reduce your balance and the amount of interest you’ll pay, it will help to repay as much as you can each month. You can pay extra at any time – not just when you receive a statement. This could also help prevent you falling into persistent debt.
Managing your overdraft
You can manage most things online using Internet Banking or the Mobile Banking app. Both also give you access to support:
Internet Banking: From the account menu select ‘Need help with your debt or payments?’.
Mobile Banking app: Log on to the app, then use the three dots ‘More’ menu to find ‘Need help with your debt or payments?'.
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Struggling with your payments?
If you’re struggling to manage your personal loan payments, it’s important to get support as soon as possible. We’re by your side – find out how we can help.
With regular payments and a fixed term, a personal loan can be a predictable way to borrow.
If your interest rates are fixed, your monthly loan repayments will be too. That means it’s easier to keep track and understand your borrowing costs.
Some lenders offer personal loans with variable interest rates. If you’ve got one of those, just be aware that your payments could change over time.
Reducing your borrowing costs
You may be able to make overpayments on some loans without additional charges for early repayment. This could reduce the term and amount of interest you’ll pay overall.
Check your personal loan account terms and conditions for details.
Need a short break?
You may be able to apply for up to two repayment holidays of one month in a 12 month rolling period, subject to approval. Just be aware you’ll pay more interest overall, and your loan term may be increased.
Managing your overdraft
You can manage most things online using Internet Banking or the Mobile Banking app. Both also give you access to support:
Internet Banking: From the account menu select ‘Need help with your debt or payments?’.
Mobile Banking app: Log on to the app, then use the three dots ‘More’ menu to find ‘Need help with your debt or payments?'.
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Struggling with your payments?
If you’re struggling to manage your mortgage payments, it’s important to get support as soon as possible. We’re by your side – find out how we can help.
You can also get online support with your mortgage. Fill in a short form to get started.
Mortgages offer a structured way to borrow, with monthly repayments that could be fixed or variable.
If you have a fixed interest rate, your monthly mortgage payments will be fixed too. That makes it easier to keep track and understand your borrowing costs, at least until your fixed rate ends.
If your mortgage is on a variable interest rate, be aware that your monthly payments could change over time.
Some lenders may offer a temporary switch from a repayment mortgage to an interest only mortgage for customers in financial difficulty, however this is not something that we offer.
When we discuss temporary changes to mortgage repayments, it is to give you the chance to review your finances as a whole and find long-term solutions which are appropriate and affordable.
If you don’t keep up with your repayments, you could lose your home.
Reducing the costs
You may be able to make overpayments on some mortgages without early repayment charges. This could reduce the term and amount of interest you pay.
Check your mortgage account terms and conditions for details.
Switching to a new mortgage deal
If your current mortgage is coming to an end, look at ways to set up a new deal.
Need a short break?
You may be able to apply for a mortgage repayment holiday, subject to approval. Just be aware the interest will still be added to your account so the amount you owe overall will increase.
Change your mortgage term
To help manage your monthly payments you might be able to change the term of your mortgage. Just bear in mind that taking longer to repay your mortgage will usually mean you’ll pay more in interest.
Managing your mortgage
You can manage most things online using Internet Banking or the Mobile Banking app. Both also give you access to support:
Internet Banking: From the account menu select ‘Need help with your debt or payments?’.
Mobile Banking app: Log on to the app, then use the three dots ‘More’ menu to find ‘Need help with your debt or payments?'.
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Visit our free independent help and advice page to find support on government benefits or grants, debt advice, housing, general advice and online digital training.
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If you’re out of work, cannot work or on a low income, you may qualify for financial support from the government in the form of Universal Credit.
Turn2us is a national charity that helps people in financial hardship to gain access to welfare benefits, charitable grants and support services.
Use their free and confidential benefits calculator to find out what benefits you are entitled to claim.
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It’s always helpful to plan out your spending, keeping close track of what’s coming in and going out.
You’ll find useful tools and tips from our money management page, including budgeting advice and a budget calculator.
By following a budget, you could:
- Avoid impulsive purchases.
- Repay debts faster, saving on borrowing costs.
- Focus on saving, making it easier to manage future challenges.
- Avoid unnecessary and persistent debt, or financial difficulties.
- Have money in your pocket to take advantage of any price reductions or offers.
- Feel less stressed and not argue about money.
- Feel more in control.
Review your budget whenever:
- Your income increases or decreases.
- Your regular costs increase or decrease.
- You’re planning a large purchase or expense.
- You’ve paid off a debt – how will you put any extra money to good use?
Support if you’re spending compulsively
If you’re making unplanned purchases or if you’re worried about your spending habits, we have tools and tips to help you to take control of compulsive spending.
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You’ll find useful tool and tips from our money management page, including tips for managing your bills.
If you’re struggling to manage your household bills, it’s important to get support as soon as possible. We’re by your side – find out how we can help.
You might also be interested in organisations who can offer free independent help and advice.
Page last updated: November 2022.
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