The cost of living crisis is technically over. Inflation is near target. Real wages are rising. Energy bills have fallen from their peaks. By the conventional metrics economists use to measure a cost of living crisis, the numbers are moving in the right direction.
But for millions of British households, the lived experience is more complicated. The crisis may have ended, but its damage has not been undone.
Who Is Better Off
Higher earners have recovered their real income losses from 2021-23 relatively quickly, benefiting from wage growth in professional services and from asset price appreciation. For the top income quintile, household finances are now broadly back to their pre-crisis position in real terms.
Mortgage holders on fixed rates that have not yet rolled over are still benefiting from the low rates they locked in before 2022, though this cohort is shrinking as more fixed terms expire.
Who Is Still Struggling
Lower earners have benefited from minimum wage increases — which have outpaced inflation — but their household budgets are disproportionately exposed to the costs that have risen most: food, energy, and rent.
Private renters are worst affected. With rents rising at 6-8% annually and mortgage-linked costs having been largely passed through to tenants, many in the private rented sector are spending 40-50% of their post-tax income on housing.
The Food Bank Reality
The Trussell Trust reports that food bank usage remains at double the pre-pandemic level. The normalisation of food banks — once considered a symbol of failure, now a routine part of the social infrastructure — is one of the most significant and least discussed changes in British society over the past five years.
What the Next Year Holds
Falling interest rates will gradually reduce mortgage costs for those rolling off fixed rates. Real wage growth should continue if inflation stays near target. But the structural issues — housing costs, energy costs, the erosion of real benefit levels — will not be resolved by cyclical recovery alone.
