Five household bills that will rise in 2025 as energy prices face 3% hike
From energy and water bills to council tax and your mortgage, next year will bring financial pain to millions.
Households concerned about their finances in the coming year have had another dose of unwelcome news added to the prospect of rising bills in 2025.
On 31 December, energy market analysts Cornwall Insight predicted that energy bills could rise by 3% in April 2025 – higher than the 1% they had previously indicated. The group warned that ongoing geo-political concerns in Ukraine coupled with uncertainty over the impact of the second Trump presidency was creating a "level of volatility we haven’t seen for many months".
From water and energy to council tax and the television licence, households are bracing for yet more financial strain, following years of navigating the cost of living crisis.
Here's a rundown of which bills you can expect to go up and by how much.
Energy bills
The energy price cap is already increasing to £1,738 on 1 January, pushing up bills in the middle of winter and the cold weather.
But the latest forecast from Cornwall Insight suggests that the energy price cap could rise again by nearly 3% in April (around £1,785 a year for a typical dual fuel consumer).
They have projected standing charges (in £/day) of £0.56 for electricity and £0.33 for gas; and unit costs (in p/kWh) of 25.93 for electricity and 6.61 for gas.
The experts said: "Geopolitical instability saw prices rebound in the second half of December. Market prices surged last week due to new uncertainty over the Ukraine transit deal and the higher level of withdrawals from EU gas storage facilities.
"These factors, combined with the significant uncertainty over the US LNG export plans under a second Trump presidency, mean we are expecting that our cap forecasts will continue to display a high degree of variability."
There was also the prospect of domestic reforms adding extra costs to the cap, which could add at least another £20 to annual bills. In December, Ofgem revealed plans that could mean energy firms will have to offer household tariffs free of standing charges as an alternative to existing deals.
The regulator wants suppliers to have to offer “zero standing charge” tariffs alongside other tariffs by next winter as part of plans to address ballooning household energy debt, which has seen standing charges rise by 43% since 2019.
Read more: Labour to reform energy regulator to give more protections after bills crisis (PA Media)
Water bills
Virtually all water companies will increase their prices from April next year, with households in England and Wales having to pay an average of £86 more next year alone.
Regulator Ofwat announced that it will allow companies to raise average bills by £31 a year, or £157 in total, over the next five years to £597 by 2030 to help finance a £104bn upgrade for the sector.
That represents a 36% increase before inflation, which will be added on top. However, despite the average £31 a year increase, households will be hit particularly hard from April with an average hike of £86 or 20% front-loaded into the coming year, with smaller percentage increases in each of the next four years.
Bills will rise by 47% for Severn Trent customers, with a 42% increase for customers of the Welsh water companies Dwr Cymru and Hafren Dyfrdwy. Thames Water is to be allowed to hike consumer bills by 35%, as the regulator also handed it an £18.2m fine for paying “unjustified” dividends to shareholders.
Read more: Why are water bills going up so much, and what does it mean for consumers? (PA Media)
Council tax
Next year council tax will go up, which the government says will raise an additional £1.8bn for local authorities.
The Labour government announced last month that they will continue with current rules that allow councils in England to increase tax rates by up to 3%, plus an additional 2% for those authorities providing adult social care.
However, councils wishing to increase tax rates by more than the up-to-5% cap are required to receive government permission or hold a referendum.
It means the average band D council tax household faces an above-inflation increase amounting to more than £100 next year.
Read more: UK households face new rise in council tax bills 'without referendum' (Birmingham Live)
Mortgages
It is difficult to say with any degree of certainty whether mortgage repayments will go up or down in 2025.
Following Labour’s first budget in October, mortgage rates increased – but some lenders are cutting their rates in the final days of 2024.
Barclays reduced its deals by up to 0.14% earlier this month, while TSB lowered theirs by up to 0.25%.
However, those on variable mortgages are on shaky ground as what they pay relates to interest rates and inflation – which has risen in recent days.
The average two-year fixed-rate mortgage increased to 5.49% earlier this month, up from 5.42% a month ago.
The Bank of England recently warned that nearly half of mortgage holders are set to see their payments rise over the next three years. They estimate that around 4.4 million mortgages will experience higher payments by 2027, with 420,000 households facing hikes of £500 per month.
Read more: UK households increasingly worried about rising rent and mortgage costs (Yahoo Finance)
TV licence
Last month the government announced that the TV licence will increase in line with inflation each year until 2027 - rising in April next year to £174.50.
It will be an increase of £5, or an extra 42p a month, after the last £10.50 rise brought the charge to £169.50 in April.
The previous Conservative government scrutinised the BBC licence fee while in power, freezing it for two years at £159 before it was increased at a lower rate than the corporation expected.
The household payment, which funds much of the BBC’s operations, will be increased each year in line with the annual consumer price index (CPI) inflation rate.
