Will Iran war make the UK cost of living crisis worse? – The Latest

0:00Lucy Hough:This is The Guardian.

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0:47Lucy Hough:It feels like it's kicking off on so many different fronts in terms of the things that we all spend our money on. On the petrol and the diesel front, certainly already gone up. The mortgage market is sort of internal energy bills, I think. If you're putting money on it, I think we'd have to be saying that's going up.

1:02Rupert Jones:The war in Iran has sent shockwaves through the global economy and could threaten a new cost of living crisis in the UK. From The Guardian's Today in Focus, this is the latest with me, Lucy Hove. I'm joined by Rupert Jones, who is deputy editor of The Guardian's money section. Thanks so much for coming into the studio, Rupert. So, I mean, people might recall or is in certainly recent memory, the economic shockwaves that were sent out across global markets and for consumers in the wake of the Russian full scale invasion of Ukraine. One thing that's become clear in the week and a half or so since the war broke out in Iran is that similar levels of economic shock are spreading in a way that consumers are already starting to feel the pinch.

1:47Rupert Jones:And there are warnings that this could start to send energy bills here and elsewhere up.

1:53Lucy Hough:Yes, that's right. You're right. It's I mean, with this thing, it's just it feels like it's kicking off on so many different fronts of in terms of the things that we all spend our money on, the things that we build on. And in some things seem to be sort of there's maybe not that much movement right now. Other things are moving right now. I mean, so household energy bills is one of those ones where there's a little bit of security in that there's this off-gem price cap, obviously, that probably most people know about now that sort of, you know, that caps off the maximum of what you pay. They've set it for the period 1st of April to the end of June.

2:25Lucy Hough:So we've got that's nailed down, if you like.

2:28Rupert Jones:It's not far away. Thank heavens.

2:29Lucy Hough:It's not that far away. Of course, the worry is, I mean, yes, there's been lots of sort of people, there's various analysts have been have already, I mean, even before things really started kicking off, people have been sort of saying that they maybe think that the price cap could have to increase perhaps 10 % for the next period, which would be July to September. So as I say, there's a little bit of security at least there for the next, you know, next few weeks or so for people. And I guess if you were trying to find some sort of, what's the word, some positives, some silver linings in what is a really black cloud, the summer, I guess, is not the worst time.

3:05Lucy Hough:If the price cap goes up, we do use less energy. You know, I guess we need to sort of all hope for a sort of a hot summer. And there will be people with things like solar panels, they can, that will sort of help. So but yes, energy bills, I think, if you're putting money on it, I think you'd have to be saying,

3:20Rupert Jones:that's that's going up but really people facing months of uncertainty about where the prices will increase as we approach the colder months one thing that has been more clear more stark for people is the cost of petrol if they're filling up their cars in the last few days that has already increased in a way that people are already really feeling yeah it is absolutely so petrol and diesel

3:41Lucy Hough:is one of those ones it's always the first thing that you sort of see going off on the sort of the whatever the panel with the sort of the red lights flashing it's always the one that that's the one that starts hitting people first really so yes in terms of sort of unleaded when I looked just now so unleaded petrol is sort of nudging 140p a litre on average I think it was roughly about 132p a litre just before this all sort of kicked off diesels now roughly at about 155p a litre on average that was at around 142 you could say that's not terrible but we of course we don't know how long this whole thing is going to be going on for i mean there were warnings that if oil stayed above this sort of crucial hundred dollars a barrel uh figure that everyone always talks about that petrol could rise uh towards 150p a litre and that diesel might even start creeping towards 180p.

4:37Lucy Hough:Now, I mean, small bit of good news right now is that the oil, when I looked, oil is sitting at roughly more like about$90 a barrel. But yeah, they've certainly already gone up basically.

4:48Rupert Jones:Yeah. And as we were discussing on yesterday's podcast, Donald Trump has also been spooked by the turmoil in global markets. So he was trying to say, yes, the war will be over pretty soon. But nonetheless, there is still major action. There is a major blockade of the Strait of which is this vital narrow passage in the Persian Gulf through which one fifth of the world's oil travels that chokehold is is causing this impact isn't it given the way that oil underpins so much

5:17Lucy Hough:of the global economy it is and I mean obviously I mean in terms of the on the petrol and the diesel front I mean prices have always varied hugely around the forecourts you know and there are there are lots of apps now and websites that people can and do use you've got with petrol prices. So I think this is the time, you know, people need to be sort of really checking, you know, maybe in the past, they wouldn't bother checking those things, because they felt that it was sort of fairly small beer amounts. But now you've really got to be sort of checking those things out, really.

5:44Rupert Jones:One thing that's coming up in the short term is the Bank of England's decision on interest rates. There had been indications that the Bank of England was expected to cut interest rates. We've just come off the back of two cuts, which meant people applying for mortgages were seeing cheaper rates than they may have seen since 2022 during the time of Liz Truss's mini budget. But already there's huge disruption to the mortgage market as well, isn't there? Hundreds of mortgage products being pulled from the market and interest rates already increasing for people who might be applying.

6:15Lucy Hough:Yeah, you're right. So the mortgage market is sort of internal like so many other sectors at the moment. Obviously, all this stuff about inflation and the interest rate projections, all of this stuff sort of feeds into the, if you like, like the computations for how you price mortgages and the money markets and all of that sort of stuff. So, yeah, in fact, today there's been sort of some quite sort of notable developments. So the average rate on a two year fix has now gone above five percent for the first time since August. So that's quite a notable thing. Yeah, we've actually had nearly 500 mortgage deals that were just basically pulled from the shelves in the last 48 hours.

6:54Lucy Hough:that isn't as bad as it was when we had the sort of the fallout after the famous notorious mini budget of 2022 then we had nearly a thousand deals pulled within basically one day but yes things are yeah i mean basically deals are being deals are basically being withdrawn and i mean literally people are sort of reaching out to grab that deal and it's being sort of withdrawn taken off the shelf being repriced you've got lenders like hsbc they've already announced i think within In about the last week or so, they've announced two lots of repricings. So, yeah, I mean, book a deal if your time is coming up, because this is, I mean, this year, unfortunately, is a big year for sort of people getting new deals.

7:34Lucy Hough:We've got about, I think it's 1.8 million people. Their fixed rate mortgage is basically ending this year and probably the vast majority of them are going to have to get a new deal. So you can book a deal. You can book something in advance. So there are ways of doing it. you can sort of book a deal in advance, put your sort of marker down on that and then sort of slightly see what sort of happens over the coming weeks.

7:57Rupert Jones:But at the same time, are people then also going to be going to supermarkets? Is the price of everyday living, and you mentioned inflationary pressures, that impacts not just borrowing or saving money, right, but everyday costs too?

8:11Lucy Hough:Yeah, absolutely. So I mean, in terms of the sort of, if you like, the big consumer price inflation figure that we talk about, a lot of which is, you know, groceries and food and things like that. So So we've just had a warning that the main inflation that UK consumers see, that that could end the year higher than previously expected at roughly 3 % because of the war, which is all rather unfortunate. I mean, headline inflation is currently, well, according to the most recent data, is at about 3%. But the government and everyone had been hoping, well, more than hoping, expecting that it would drop close to 2 % this year.

8:46Rupert Jones:And Rachel Reeves, the Chancellor, last week saying that people would be£1 ,000 per year better off. That now sadly feels like wishful thinking, doesn't it?

8:56Lucy Hough:It's impossible to see in the current climate how, I mean, the trouble is with the, I guess, oil and energy just feeds into so many aspects of our life. I mean, it just affects everything, really. And of course, you've got a bit of a perfect storm.

9:09Rupert Jones:Rupert, thank you so much for your time.

9:10Lucy Hough:Thank you for having me.

9:12Rupert Jones:that's it for today my huge thanks again to Rupert Jones deputy editor of the Guardian's money section you can keep up with his work and that of his team over at theguardian.com and if you're looking for something else to listen to I'd really recommend today's episode of the Guardian's audio long read which is from the archives and tells the story of one woman's childhood spent between Essex and Iran thanks for listening to this episode of the latest the new evening edition of Today in Focus Today in Focus will be back in your feeds as usual tomorrow morning. The latest will be back tomorrow night.

9:41Rupert Jones:This episode was presented by me Lucy Hough. It was produced by Annie La Vesper. Senior producer was Ryan Ramgobin and the lead producer was Zoe Hitch. This is The Guardian.

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11:10Lucy Hough:And I'm Rob Armstrong. And together we host the Unhedged podcast at the Financial Times. Absolutely wild couple of days for the Brent oil price. On Friday, we're in the mid 80s. Sunday, early Monday, we get as high as 119. The price as we speak, 86. During the COVID shock, the oil price went negative. Even bearing that in mind, oil traders are saying, this is some crazy stuff. Unhedged. Listen wherever you get your podcasts.