Ahead of the UK Budget on 28 October 2026, households are weighing higher living costs against a government promise to provide breathing space. For Ipswich homeowner Dawn Fazackerley-King, an expected mortgage rate increase could add about £250 to her monthly payments.

Key Takeaways

  • Fazackerley-King expects her mortgage rate could rise from 1.4% to about 5.3%.
  • In an August survey, 55% of responding adults said their cost of living had increased from the previous month.
  • Chancellor John Healey has promised not to increase income tax, National Insurance or VAT in his first Budget.

UK Budget arrives amid household pressure

Fazackerley-King, a self-employed Pilates instructor and mother of two, said her family has already cut back as costs have risen. She and her husband have a household income of about £70,000 a year.

She expects the higher mortgage costs in a few months and said there was “no more fat to trim” from regular outgoings, which include council tax and energy bills.

In Clacton-on-Sea, single mother Jessica Taylor said her income is about £26,000 a year and that she receives Universal Credit. She described living month to month and said an unexpected car bill could cause anxiety.

Living costs and government pledges

The Office for National Statistics survey found that 55% of responding adults reported a rise in their cost of living in August compared with the previous month. That was down from 62% in August 2025 and 79% in April 2026. Food shopping, fuel and energy bills were the most common reasons given by those reporting higher costs.

The Office for Budget Responsibility forecast that real household disposable income would grow by an average of 0.75% a year between 2026 and 2030, compared with average annual growth of 3% between 2000 and 2007.

Prime Minister Andy Burnham has announced a £2 cap on most single bus fares in England and a cut to VAT on domestic electricity bills. He has also announced plans to remove standing charges on gas bills. Healey has said his Budget will stick to Labour’s fiscal rules as well as its commitment not to raise the three main taxes.

Next milestone

Healey is due to deliver his first Budget on Wednesday, 28 October.

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