A financial analyst had found what she calls “six financial blows” lurking in the small print of this week’s Spring Statement, delivered by Chancellor Rachel Reeves.

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, says: “The devil is always in the detail during a big speech by the Chancellor, and in the mighty tome the Office for Budget Responsibility puts out at this time of year there’s plenty of detail for bad news to lurk in. There are six pieces of bad news that emerged from the small print, which means life could get tougher in the next few years.”

One is about mortgages. Coles says: “The Bank of England is forecast to cut rates from 4.5% to 3.8% by around the middle of 2026. It’s expected to stay slightly higher for longer than it predicted in its October forecast. However, the fact that around 85% of the mortgage market is fixed means that the average interest rate on the mortgages people currently hold is expected to rise from around 3.7% to a peak of 4.7% in 2028 – and hold steady around this level.

“It takes an awfully long time for rate rises to feed through into the fixed rates people are actually holding. The Bank of England says around a third of people on fixed rate mortgages haven’t remortgaged since rates started to rise.”

The other blows identified by Coles are:

Inheritance tax – She says: “We’re expected to pay £8.4 billion in inheritance tax by the end of this tax year, and the bills are going to keep rising. This is fuelled by a mixture of frozen tax thresholds and the decision to make defined contribution pensions subject to inheritance tax from 2027. By the time pensions come into scope for inheritance tax it is estimated to have surged to £11.7 billion.”

Income tax – “Income tax (excluding self-assessment) is expected to raise £260.3 billion in the current tax year, rising to £310 billion in 2027-28. It demonstrates the profound impact the frozen tax thresholds are having, particularly at a time when wages are rising. Once the end of the freeze kicks in, from April 2028, the tax bill is expected to rise more slowly. Of course, this assumes that the Chancellor won’t be tempted to freeze the threshold in the autumn Budget, which can’t be ruled out at this stage.”

Prices – “We’re going to be squeezed by price rises this year. Annual inflation is forecast to rise from 2.5% last year to 3.2% this year – 0.6 percentage points higher than the OBR forecast in October. The peak is likely to come in July, when the energy price cap is expected to rise, food inflation is forecast to be higher and water bills will be taking a toll. On the plus side, it is then expected to fall, as the energy price cap rises of a year earlier fall out of the figures. However, by then it will have done the damage, and eaten away some of the space that has been opening up in people’s budgets.”

Wages – “Wages were up a robust 4.7% last year, well ahead of inflation. It helped ease the squeeze for millions of people, and built more wiggle room in people’s budgets. Unfortunately, the good times aren’t going to roll for much longer. Wages before inflation are expected to rise 4.3% in 2025, and then just 2% a year from there. Employers have been forced to offer higher wages recently because there were lots of vacancies around and not enough people to fill them. As the labour market weakens slightly, vacancies are falling and unemployment rising, which will give employers more flexibility. Many of them were working on tighter margins, because wage costs were rising and they didn’t want to pass this on through price rises.” 

Savings – “People have been taking real advantage of the extra space in their budgets, and putting more away for the future. The household savings rate has risen from 2.75% in 2023 to 6.25% by the end of 2024. It’s expected to hold around this kind of level through 2025. Unfortunately, the OBR is then expecting a fall for the rest of the forecast – ending up below 3.25% by the start of 2030. This is always a risk when real wages aren’t rising so fast, the tax take is on the rise, and more of people’s budgets have to be redirected to paying the bills.”