Unknown Speaker 0:00 Hello, I'm Martin Lewis of money saving expert.com.
And this is a warning video.
The winter coming is going to be bleak.
I believe unless action is taken, we are facing a potential national financial cataclysm.
As individuals, you need to be aware of that so you can take if possible.
And to be honest, it's not always possible preventative action yourself.
Yet more sir.
The Conservative Party leadership candidates, one of whom will soon become our prime minister,
need to know how Stark things will be on the day they take office.
So far, the debate seems to have mostly ignored the fact we are sitting on a financial time
bomb that's due to explode in September.
And those candidates in truth are the only ones with a chance of defusing that catastrophe.
So this is if you like an open video letter to them.
And an explain that to you of what's coming and why I'm so worried.
My hope is by doing this, while it may help avert some of those potential disaster scenarios,
and of course, energy bills are at the centre of this.
But the shockwaves are likely to ripple out to all areas of people's lives.
Anyone struggling anyone with a mortgage credit cards, there are big impacts in those areas
too.
But let's focus first on energy.
Now, it used to be we had a competitive energy market, you could switch tariff or switch
firm to save quite a substantial amount.
But that's gone.
There's virtually no competition.
Now.
We have regulated pricing in the main by dint of off gems price cap.
Now that isn't an absolute cap on what you pay for energy, what you pay depends on what
you use use more, you pay more.
Instead, every six months, and soon to be every three months.
There is a cap on the unit rates and standing charges of gas and electricity if you are
on a standard variable tariff, which most people are.
And what's crucial to understand is the future price cap rate is mostly predictable, because
it's dictated by the algorithm that has been published by the regulator of gem.
And that is based mainly on the year ahead wholesale prices, which we also know there
are different types of wholesale rates.
So just be careful on that.
Now, the wholesale rates that counts have I'm afraid spiked again in recent weeks.
And for predicting the price gap, I use the analysts Cornwell insight and their latest
predictions are frightening.
Remember, in April, the price cut went up 54%.
Taking somebody on typical use to 1971 pounds a year.
Now typical use is just my way of showing you the scale of prices.
Everything is different.
So for individuals focus on the percent, but for society, we can look at the typical use
figures on the first of October.
And this is a strong prediction, because it's based the first of October cap on wholesale
prices from February to mid August.
So we're most of the way through that.
That but the awful sickening news is it's now predicted to rise 65% again, taking the
bill for somebody on typical use to 3240 pounds a year.
And that may be a conservative estimate because it keeps going up.
Now we'll know the exact number by the end of August.
And that means that on the fifth of September, when our new prime minister is scheduled to
take office, the direct debits will already be increasing by 65%.
Someone who pays 100 pounds a month now will start to pay 165 pounds a month somebody who
pays 200 pounds a month now will start to pay 330 pounds a month and it doesn't end
there.
The price cap on the first of January.
Not quite a stronger prediction, but it's likely to go up 4% Taking the bill to 3360
pounds a year for someone and typical use and then in April and we are getting into
crystal ball territory.
But in April when it was thought we might start to see prices dropping.
No.
Now the prediction is they'll stay flat or only drop a few percent meaning next April
we'll still be paying on typical use over 1000 pounds a year more than we are now.
Unknown Speaker 4:49 Now to put that into perspective, that means
from October typical energy bills will cost over a third Have the new state pension and
more than a third of those on the old state pension?
Well, it's just not affordable.
And remember, the 400 pound reduction that is due to come off all bills in October, it
was announced in May by the former chancellor and conservative leadership candidate, Rishi
Sunak.
Well, that help has already been swallowed up.
The increase in the prediction from when that was set in May, then they thought October
would be 2800 pounds.
Now we're looking at 3250 quid, that 400 pounds has gone just by the increase in the prediction
of loan.
Of course, on top of that, there's more money available for those on means tested benefits
those on the state pension, and people with disabilities.
Yet the amounts being given were all based on where we were back in May.
And that is not enough.
Now.
Remember, that direct debits will be rising before the new Pm is in situ.
And that means people will be panicking, there's a risk to mental as well as physical health.
These rises are unaffordable for many on the lowest incomes.
And while tax cuts will help some people or leave the inflationary risk to others.
For those at the bottom end of Universal Credit and many state pensioners, the rises, when
added to the increasing costs of food and transport and other inflation means there'll
be back to that choice between starving and freezing.
This winter, we're going to need warm spaces, public buildings, local councils, universities
and libraries will need to open their doors and invite people in to keep warm because
they can't afford to put their own heating up.
And to the Conservative Party candidates, you need to understand the level of feeling
out there.
When I've talked about this on social media, and I have a decent following.
And people's eyes are opened, the biggest response is actually people suggesting civil
unrest primarily in the form of mass non payment.
And I think that unrest is becoming a plausible outcome unless we see you get a handle on
this.
Now I'm going to move very quickly because I've gone on quite a lot on to a couple of
other topics, mortgages.
First of all, of course, interest rates are up.
And they're likely to go up more, the cheapest fix is back in October with just below 1%.
Now that just below 3%, adding 200 pounds a month to a 200,000 pound mortgage.
Now many are of course protected because they're still on fixed rates, not variable rates.
But millions of those are due to end this year, and many more than next year.
And my concern is when people try and get that cheapest deal, they have to pass an affordability
test.
And as the cost of living crunch bites.
Many of those who were just above the limit, hundreds of 1000s or potentially millions
of people will fail.
And that will mean
Unknown Speaker 8:07 they might have to move to their much more
expensive standard variable rate ironic, isn't it?
They can't afford a cheap rate.
How can they afford to pay much more, or some people will just pay a higher rate mortgage
not get the cheapest fix, others will not be able to move lender will be stuck on their
own lender and there'll be no advantage of competition.
That's a problem that needs to be addressed as to is under unsecured debt.
Right now.
Debt agencies are already talking about substantial proportions of people who are running deficit
budgets.
What that means is they've been to a debt counsellor who's trying to reduce their outgoings
to a minimum and even though a professional has looked at it, they still have less income
than their minimum expenditure.
So it's no surprise, credit card debt is rising.
And I suspect after the first of October, it will explode.
And an explosion of consumer debt is crippling to individuals and the economy.
It means many just about managing things will turn into not managing at all.
We have to look at the banks here.
Their debt interest rates are going up.
But their savings rates are not going up as much either that needs to be fixed, or we
need to mandate much better forbearance measures for those in the worst type of debts.
And there's much more I could talk about the explosion of buy now pay later and the fact
that won't be regulated now until 2023 After the hardcore cost of living crisis, petrol
prices, the lack of regulation on heating oil and LPG, the food prices in the shops,
but hopefully the picture I've painted sets the scene of what's coming and remember to
It's all very well to talk about inflation dropping, but that doesn't mean prices will
go down or or back to where they were.
All it means is they'll stop rising as quick likely to individuals listening to this if
you've got financial room to manoeuvre, you need to be battening down the hatches now
redoing budgets and being prepared to use savings.
But as a nation, we have a problem with financial capability and financial resilience.
And to that to weather the coming storm I speak directly to those candidates.
This cost of living issue needs to be at the front and centre of the debate.
More intervention intervention and action is needed and it needs to be quick.
This is a hard deadline coming without more action.
A worry lives could be lost
Transcribed by https://otter.ai