Households will burn through almost half of their “rainy day” savings pots by the new year as energy bills rise to record highs.
An average of £2,230 will be withdrawn from savings accounts to cover rising gas and electricity prices, according to Investec bank. This will wipe out much of the savings that households built up during coronavirus lockdowns, when spending was greatly reduced.
In total, £62bn will be wiped off household savings to pay crippling energy bills alone, representing 40pc of current savings, which are estimated to be £154bn. The average household has £5,540 in savings.
The price cap on energy bills is expected to reach £3,523 in October and then £4,210 in January, Investec forecast. This would mean bills have increased by £3,000 since March this year, when the price cap stood at £1,277.
Gas, petrol and electricity will cost a combined £5,774 on average per household by the start of next year, the lender warned. This will eat up more than 12pc of household post-tax incomes, tripling the share of wages that are spent on energy in just two years.
Ellie Henderson, of the group, said millions of families would struggle to pay their bills this winter. “This doesn’t even account for food price inflation, rising mortgage costs and increasing rents,” she said.
“Price rises will outstrip how much people earn and some will have a large pile of savings so they will be able to eat into it to buffer the shock but others won’t have that safety net.”
Restricted spending during repeated Covid lockdowns had provided a savings cushion of £154bn but that will quickly be depleted, she warned.
Former chancellor Rishi Sunak announced a package of support measures in the spring, but experts have warned they will only cover a fraction of rising bills. All domestic energy customers will receive a £400 grant to offset their energy bills, and those in council tax bands A to D will receive an extra £150 payment.
In total, low-income households will have received at least £1,200 from the Government by Christmas. However, that will not cover the rise in energy bills.
The support package would need to double in size to fully shield the families, according to the Joseph Rowntree Foundation, a campaign group.
Katie Schmuecker, of the charity, said: “Failure to respond will put many families beyond having to choose between heating and eating in the run up to Christmas, they will be unable to afford either.”
Mr Sunak has announced plans to cut VAT on energy bills, which would save households around £200 a year, as part of his campaign to win the Conservative leadership battle. Meanwhile Ms Truss has said she will suspend environmental and social levies that are added to energy bills, saving an estimated £150 a year per household.
More than a million rented households were already in fuel poverty in 2021 before energy prices soared, charity Citizens Advice has warned. However, there are fears that millions more could be pushed into this bracket as they will not be able to pay off their rising bills.