With the price of just about everything (apart from houses) shooting into the stratosphere after the Bank of England warning that the good times are over, here are some tips on how you can beat rising inflation from the Times Online:

Families were warned last week to prepare for years of stagnant growth in house prices and take-home pay, but big rises in the cost of living, in one of the Bank of England’s bleakest economic assessments for years.

Mervyn King, the Bank’s governor, said that the rate of inflation reached 3% in April and could hit 3.7% by the end of the year because of the soaring cost of fuel and food. This would be well above the Bank’s 2% target and the highest for 16 years. And while the cost of living shoots up, the economy is set to grind to a halt by the autumn with growth of just 0.2% a quarter over the rest of the year.

King said: “For the time being at least, the ‘nice’ decade is behind us. We are travelling along a bumpy road as the economy rebalances.”
House prices are already falling and Halifax said last week that homeowners should be prepared for values to fall until at least the end of 2009 while earnings catch up, enabling first-timers to get back into the market.

Martin Ellis, chief economist, said: “If we were to see a 10% fall in house prices by the end of next year, they would be back at sustainable levels. Even then, homeowners should be prepared for prices to go up less than earnings for several years.”
The combination of stagnant growth and persistent inflation has raised the spectre of “stagflation”, although the economy is still a long way from the double-digit inflation of the 1970s. However, there is plenty to see you through the gloom. Here we look at ways you can protect yourself from the hard times ahead.

Fix your energy tariff
Wholesale gas prices have shot up more than 50% since the beginning of the year, and Centrica, parent company of British Gas, hinted at further energy price rises this year.
Joe Malinowski at theenergyshop.com expects a 30% jump in gas bills and a 15% increase in electricity bills towards the end of the summer. This will add another £250 to the average dual-fuel bill, taking it to £1,300.

Many experts therefore urge consumers to opt for capped deals before they are withdrawn. British Gas and EDF have already stopped offering some of their top capped products.
You will pay a premium, but this should be dwarfed by the increase in energy bills now expected. Capped deals are on average 2% or £19 more expensive than standard plans and about 10% or £96 more expensive than the top online products, according to Uswitch, the comparison firm.
Malinowski recommends Scottish Power’s Fixed Price Energy Online 2011. It offers protection until February 28, 2011, and costs, on average, about £979 a year for dual fuel. However, this deal is expected to be withdrawn early next week.

If you don’t get it in time, the Npower capped deal offers protection until the end of 2011 and costs £1,046 for dual fuel
Invest in natural gas
You could offset the rise in your energy bills by investing in gas so you profit from further price rises. Patrick Armstrong of Insight, an investment firm, thinks gas could be a better investment than oil. He said: “The demand for natural gas is likely to grow in the next few years. It is a clean energy source so will also benefit from environmental concerns around the world.”

You can track natural-gas firms through an exchange-traded fund such as the FCG First Trust ISE natural gas index fund, which follows the performance of 30 companies in the ISE-Revere Natural Gas index. In the past 12 months it has grown 37%.

Save more on home services than your mortgage
Home services such as phone and broadband are among the few costs that have fallen over the past 12 months, so it will certainly pay to switch.
Families who took out separate home phone, TV and broadband packages several years ago, and who have never switched, could save as much as £500 by moving to an all-in-one deal - more than many people save by remortgaging.

Simplifydigital estimates that the average saving by bundling all three services is £160 a year. If, for example, you have a TV service from Sky with all the entertainment mixes, and up to 8Mb broadband service with Madasafish and a BT Ultimate Anytime Plan phone service, your total cost would be £90.44 a month after introductory special offers. The first year cost would be £1,061.

Simplifydigital said that if instead you went for Sky’s bundled package, you would get the same TV deal as above, a faster, up to 16Mb broadband service and a similar phone package for £60 a month. There is also a set-up fee of £30. The total first-year cost would be £876 - a saving of £185.
Ask lenders to keep back rate cuts
If you set aside the £30 you saved when the Bank last cut rates and used it to pay off debt, you could save £6,080 over the next 10 years. Brokers such as London & Country say that it has never been more important to build up a cushion of equity in your property because lenders are increasingly reserving their best rates for homeowners with 10% and sometimes 25% equity.

While you may have sufficient cushion now, that may not be the case in a year’s time if prices fall by around 10% as expected.
Someone with a 25-year £200,000 mortgage on a tracker at 5.63% would have saved £30 last month when the Bank cut interest rates. If you could afford the mortgage before the cut, you could ask your lender to maintain your mortgage at the same level, which would knock £10,081 off your loan over the term and would allow you to repay it 14 months earlier.

Get 8% income from bonds
Take-home pay may not go up much in the next few years, but if you take out an index-linked bond at least you know your investments are rising in line with the cost of living.
National Savings & Investments (NS&I) offers two index-linked bonds. The three-year deal offers a rate equal to the retail prices index, now 4.2%, plus 0.25%, or 4.45%. The five-year bond has a rate of RPI +0.35%, equivalent to 4.55%. As there is no tax to pay on returns, the rate on the five-year bond is in effect 7.5% for a higher-rate taxpayer.
This is higher than the top-paying savings account, the Icesave one-year bond at 7.01%. As this is taxed, the rate falls to 4.2% for the higher-rate taxpayer.
If the retail prices index rose to 4.7%, which is likely if the government’s favoured consumer prices index rises to 3.7%, you would earn 5.04% - equivalent to 8.4% for a higher-rate taxpayer. You can invest up to £15,000 per issue.

Invest in coal
Despite the general focus on oil prices, coal is still a significant global player. British Gas says about a third of Britain’s energy is still produced from coal.
The price of coal has soared in the past 12 months from $30 a tonne to $100 a tonne, due largely to the demand from economies such as China.
However, the price of coal-mining firms is still cheap compared with oil firms. Research by M&G, an analyst, shows Exxon’s oil reserves have a similar value, in terms of energy, to the coal reserves of Peabody, the world’s largest non-governmental coal producer. However, while the market value of Exxon is £500billion, the value of Peabody is nearer £19billion.
You can invest in UK Coal, Britain’s largest coal producer. On Friday it was trading at 525p a share, 16% up from the beginning of the year. John Davey of adviser Bestinvest also recommends the First State Global Resources fund, up 47% over a year.

And finally, don’t fill up on Fridays
The national average price of unleaded petrol has risen 4.4p in the last month to 112.2p. Diesel has risen by 6.8p per litre in the same period to 123.6p.
Petrolprices.com , the comparison firm, says many forecourts increase the rate on fuel by 1p just before the weekend.
“Petrol stations put their prices up on a Friday because that’s the day that most people tend to fill up. It won’t save you much money, but at least you are getting back at the oil giants,” said Brendan McLoughlin of Petrolprices.com. The price usually comes down again for the rest of the week.
You can also save by taking advantage of free fuel deals. Fiat is offering £1,000 cashback when you buy its Grande Punto for £7,500-£13,500 until June 30. The deal has also been extended to the Fiat Sedici, a 4×4, which costs between £13,000 and £15,840.

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