Minimum wage hourly pay to rise by 10 per cent in April

Workers on the minimum wage will see their hourly pay rise by 10 per cent in April, the Resolution Foundation said on 19 January 2024¹. The foundation set out the increase in an article on housing costs and the cost of living, published in The Times¹.

The same article said the average UK household is set to be £1,900 poorer by January 2025 than in December 2019¹. It also said the Bank of England froze the interest rate at 5.25 per cent in September 2023, after 14 consecutive rises¹.

On housing, the foundation's cost of living survey found more than two in five households reported an increase in their housing costs in autumn 2023¹. Increases were most common among social renters and private tenants, at 54 per cent and 43 per cent respectively, and mortgaged households affected saw housing costs rise by 23 per cent on average¹. The article said 1.5 million households needing to remortgage in 2024 would still see payments rise by £1,800 a year on average, and that rising rates had cooled house prices but not rents, which were increasing at their fastest rate in more than a decade¹.

The foundation said about one in seven "housing-pinched" families had seen housing costs rise without a pay rise, and two thirds of those families said they were worried about their financial future¹.

UK Finance, in its Household Finance Review for the first quarter of 2024, published in June 2024, described the minimum wage rise as "the substantial 9.8 per cent rise in the national minimum wage" that came into effect in April². The two figures differ: the Resolution Foundation said 10 per cent¹, UK Finance said 9.8 per cent². UK Finance also said a further 2p cut to employee National Insurance contributions was announced in March and came into effect in April, worth an additional £606 a year in take-home pay for basic rate taxpayers when combined with the previous autumn's cut².

Why it matters for households

The minimum wage rise applies to hourly pay from April 2024, so workers on the floor see a larger percentage increase than most other employees, who the foundation said would receive more modest rises or none at all¹. The National Insurance cut affects take-home pay for basic rate taxpayers from the same month².

For households with mortgages, UK Finance said affordability pressures meant borrowing over the longest possible terms was more prevalent than before, particularly among first time buyers, and that external remortgage activity fell in the first quarter while internal product transfers, where affordability tests are not required, continued to grow². It said mortgage arrears rose for the sixth consecutive quarter, though the rate of increase slowed, and that possessions increased but remained low by historic norms, mostly involving mortgages taken out before responsible lending rules came into place in 2014².

Renters face different pressures. The foundation said private tenants and social renters were the groups most likely to report rising housing costs, and that renters are at the whim of landlords who can impose large rent rises or evict those who fall behind¹.

What happens next

UK Finance said markets expected the first Bank Rate reduction later in the summer of 2024, after the May hold at 5.25 per cent². It noted a general election in July, earlier than many had expected, which it said may bring a change in policy priorities later in the year, though measures affecting households or the housing market were unlikely to be felt until 2025². The foundation said falling inflation was good news, but that rent renewals and remortgaging would continue to loom over millions of households¹.

The National Living Wage and National Minimum Wage guide sets out how the pay floors rise.