Energy bill warning as cancelling direct debit payments could make borrowing ‘much harder’
Martin Lewis outlines rise in average UK household energy bills
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Financial experts are reminding the public that such a radical act could impact their ability to get a loan or mortgage in the future. This comes as The Don’t Pay UK campaign gathers support from thousands of people across the country. The movement is encouraging people to cancel their energy bill direct debit payments following the news that prices are set to skyrocket over the next six months.
Last week, the energy regulator Ofgem confirmed it would be updating the price cap quarterly instead every six months so it can respond quicker to changes in the market.
As a result, analytics firm Cornwall Insights revised its own predictions for the energy price cap which outlined the grim future facing millions of families.
Energy bills are now forecast to reach around £3,582 a year for the average household from October.
This is an increase from the prediction of £3,359 earlier this month and is a staggering rise from the price cap last October, which was £1,277.
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Furthermore, the price cap is set to hit £4,266 in January and will rise £4,427 in April under current forecasts.
In light of this, the Don’t Pay UK campaign is demanding a reduction in energy bills to an affordable level for the majority of people.
To achieve this, it is convincing people to cancel their direct debits from October, if their demands continue to remain ignored.
The group has reported that 95,000 people have pledged to join in the payment strike this October and will call on people to cancel their direct debits if this number reaches one million.
However, consumer and finance experts are sounding the alarm that cancelling payments for energy bills may be counterproductive.
Tara Flynn, the co-founder of energy comparison site, Choosewisely.co.uk, is warning of the “long-term consequences” people will face if they stop their direct debits.
Ms Flynn explained: “I empathise with the campaign encouraging people to cancel their direct debits for their energy bills.
“I understand that for change to happen, sometimes you have to get radical, and I applaud the sentiment behind it when it feels like so little is being done to help.
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“However, I’m gravely concerned about the long-term consequences of not paying energy bills for individuals.”
The personal finance expert outlined specifically what will happen if someone opts to not pay their energy bills.
She added: “If you don’t pay your bills for months on end and ignore all requests from your energy provider for payment, your provider could issue you with a County Court Judgement (CCJ), which will be kept on record and appear on your credit report.
“Unless you pay what you owe within 30 days of receiving a CCJ, it will stay on your credit report for six years, meaning it will be challenging to apply for credit during that time, making it much harder to get a mortgage, loan, credit card or even a mobile phone contract.
“For many, borrowing might be the only way to stay afloat during a potential recession, meaning The Don’t Pay UK campaign could make things even harder for the very people it’s trying to help.”
To address the rise in energy bills, the UK Government is offering a £400 grant to households which can go towards payments of their gas and electricity.
This is part of a wider support package which includes a £650 cost of living payments for those on means-tested benefits.
As the Government awaits its new Prime Minister, it is unknown what further energy bill support will be offered to households to stop these calls to cancel direct debit payments.
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