Mortgages, credit, bills, and pint prices: As pound hits record low - what does it mean for you?

How the falling pound will affect everyday people. ITV News' Consumer Editor Chris Choi reports

The pound fell to an all-time low against the US dollar after the chancellor last week unveiled the biggest tax cuts in 50 years, and signalled more were on the way.

Experts warned sterling's plunge towards parity with the dollar will send the cost of goods soaring even higher, potentially worsening the cost of living crisis.

A falling pound also means it will be more expensive for the Government to borrow money.

But what does the currency crisis mean for the average person?

Here's what the pound's weakness against the dollar means for households across the UK.

Why is the pound falling?

The value of the pound has fallen as international currency traders have been selling off sterling in favour of the US dollar, which has been on a winning streak.

The dollar has traditionally been a robust bet - and traders often buy into the dollar during times of economic difficulty.

This is why other currencies - such as the Euro and Japanese yen - are also performing at their lowest against the dollar in decades.

This week's slump in the value of the pound has been driven by markets spooked by political and economic decisions.

Chancellor Kwasi Kwarteng's tax-slashing mini-budget sparked the fall, which saw the pound hit a record low of around USD $1.03 as international markets opened Monday, before rallying in the afternoon.

Rabobank's Jane Foley said traders have cast some doubt over the Truss government's spending plans, adding: "They're worried that some of these tax cuts that have been announced aren't going to be fully funded.

"That will result in a large amount of debt at a time when the Bank of England is going to be selling some of its holdings of UK government debt."

Economists have warned that further Bank of England intervention might now be needed, which has placed further pressure on the pound.

Finance expert Louise Cooper told ITV News it is "really quite concerning".

She said: "For a chancellor just 19 days in the job to be facing such a crisis of confidence, collapsing value of the pound and significant rise in interest rates - with the potential for the Bank of England having to come out, literally within days, to raise interest rates between the times it would normally do so, in an emergency move to protect the pound - truly is extraordinary."

But government ministers have stood by the proposals outlined in the mini-budget.

Speaking to ITV News, work and pensions secretary Chloe Smith MP said: "We are confident that it's the right thing to do in the short and the medium and the long term, to go for growth in the way that the chancellor has set out."

There is speculation that the Bank of England may need to increase rates. Credit: PA Images

How could the pound falling affect households?

Pressure is building for the Bank of England base rate to be hiked further in order to steady the pound.

In a statement, governor Andrew Bailey said: "The MPC (Monetary Policy Committee) will not hesitate to change interest rates as necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit."

Meanwhile, Ms Cooper told ITV News: "Already, markets are pricing in a 1.65% rate hike by November, taking us to rates almost at 4%.

"These are massive rates compared to 2007, 2008, and that's just in the last few days. The problem is that rates at that level can do real damage to our economy."

Mortgage borrowers may see their monthly bills climb higher, with Ms Cooper warning: "If you're on a tracker mortgage - and even if you're on a fixed mortgage, at some point you will come off that fixed mortgage and you'll have to sign up for a new deal - you may well find a really very unpleasant mortgage bill coming your way."

On Monday, three lenders - Virgin Money, Halifax and The Skipton Building Society - withdrew some of their mortgages as uncertainty reigned.

Credit card holders may also need to watch out for the cost of their borrowing becoming more expensive, as rates could be pushed up.

Borrowers may see interest rates rise. Credit: PA Images

Energy bills are are likely to increase as the pound falls - the price of all of the gas that the UK uses is based on the dollar - even if the gas is produced in the UK.

Similarly, the fact that oil prices are based on the dollar means that petrol could be more expensive for UK drivers as it costs more to be imported by fuel companies.

British firms that import parts or products from across the world will face more costly currency rates, which will particularly impact areas such as food, drink and technology, where price increases could then be passed on to consumers.

For example, Paul Davies, chief executive at Carlsberg Marston's Brewing Company, suggested the fall of the pound may cause a rise in beer prices for UK customers.

He told BBC Radio 4's Today programme that the drop was "worrying" for the British beer industry, which imports beer and hops from overseas.

The fall of the pound may cause a rise in beer prices for UK customers. Credit: PA Images

Will the fall in the pound affect holidays abroad?

Foreign holidays are likely to be more expensive, especially when visiting the US and other countries whose currencies the pound has dropped against.

The euro is also weak at the moment, so the cost of holidays in Europe has been less affected in the longer term, although the pound also struck an almost two-year-low against the euro on Monday.

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How long will it have an impact?

The fall in value will mean higher prices for Britons over the coming months and years.

Samuel Tombs, an expert at Pantheon Economics, said inflation is likely to increase by around 0.5 percentage points in 2024 because of recent falls in the pound.

This means that every £1,000 that a family spends will be worth £5 less because of the drop in sterling, and will leave the average household around £150 worse off every year.

It adds to runaway inflation, which is currently at nearly 10% - driven by factors including massive rise in energy bills facing households and businesses across the UK and Europe.

The government previously committed to a social tariff but there is no solution in sight. Credit: PA

Are there any benefits from a fall in the pound?

It will now be cheaper for tourists from many countries to come to the UK, helping to support a sector which was heavily impacted by the pandemic.

It is also likely to make British companies more competitive when they export around the world.

A cheaper pound means that it is cheaper for people around the world to buy British goods and services.

Weakness in the pound also makes the UK an attractive place for international investment, particularly from the US.