Household bills fall marginally in 2021 with significant increase expected

Household bills fell marginally over 2021, with annual costs falling by £37 during the past 12 months, according to new data from comparethemarket.com.

This new research which analyses the cost of energy, home, and motor insurance, based on comparethemarket.com’s switching data, shows that household bills were cheaper last year than the two years prior. A typical household spent £1,968 on these three services over the past year – falling from £2,005 in 2020.

However, a sharp increase in the cost of household bills is expected in 2022 with the energy price cap expected to rise by hundreds of pounds due to the energy crisis at the end of 2021, and insurance premiums being increased by insurers following changes introduced by the FCA to tackle the loyalty penalty. With a current rise in inflation and cost of living, this potential hike in household bills could tip many families into significant financial difficulty this year.

Ursula Gibbs, director at comparethemarket.com, said “Overall, bills fell for the average household last year, but this comes in the face of rising costs towards the end of the year. The outlook for 2022 is not as positive but our data suggests there are still savings to be made for those who shop around for certain products. ”

The average household energy bill now stands at £1,149, up from £1,109 in 2020 – an increase of £40 year-on-year. The sharp rise in gas prices towards the end of 2021 may likely cause the energy price cap to be raised by hundreds of pounds in April 2022.

The decrease in household bills was driven by a drop in motor insurance costs, as 2021 saw motor premiums fall by £80. The average cost of motor insurance across 2021 stood at £644. The cost of car insurance tumbled compared to previous years, suggesting insurers spent 2021 keeping the cost of policies low to attract new customers ahead of the introduction of the Financial Conduct Authority (FCA) pricing regulations in January 2022. While the regulations are designed to stop existing customers from being penalised for loyalty, insurers have already begun to increase premiums for new customers.

The cost of home insurance increased marginally to £175 in 2021 and premiums have been steadily increasing over the last three years.

Gibbs continued: “Households are teetering on the brink of considerable increases to their household bills particularly from their energy providers. It is estimated that the energy price cap is likely to rise by hundreds of pounds in April for many consumers, especially as inflation creeps up and the cost of living continues to climb.”