MILLIONS of households could benefit from a huge change to bill rules which could prevent hefty mid-contract price rises.
Mobile and broadband providers could be banned from linking price rises to runaway inflation figures under new proposals from the regulator.
The regulator said mobile and broadband customers were being hit with mid-contract rises which they found difficult to understand.
More than half of mobile customers and around four in 10 broadband customers were on inflation-linked contracts in April this year, Ofcom's analysis discovered.
Yet a survey for the regulator found customers of these providers had very little knowledge of the details.
It said that only 16% of these broadband customers and 12% of mobile customers knew that their costs could rise, and that any increase would be linked to inflation with an additional percentage added on top.
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Inflation – which is a rough measure of how quickly the prices of things that average people buy are rising – has run rampant over the last two years.
One inflation measure, Consumer Price Inflation (CPI), peaked at 11.1% in October last year. That means that between November 2021 and October 2022 the prices of what the average Briton bought rose on average by 11.1%.
For many mobile and broadband customers, this has greatly increased their monthly payments.
In an example provided by Ofcom to demonstrate the new rules, it said a previous advert saying that a plan cost £30 initially but would rise by CPI plus 3.9% would have to change.
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The new advert on a provider's website would read: "Monthly subscription price: £30.00 until March 31, 2024. Increasing to £31.50 on April 1, 2024 and £33.00 on April 1, 2025.
Ofcom chief executive Dame Melanie Dawes said: "At a time when household finances are under serious strain, customers need prices to be crystal clear.
"But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.
"Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget."
For now, Ofcom will consult on this proposed new requirement until February 13 2024, and plan to publish its final decision in spring 2024.
It intends for the new rule to come into effect four months after the publication of its final decision.
It comes after Which? warned that broadband customers could pay £150 more than expected due to "unpredictable" mid-contract price rises in 2024.
The consumer group analysed hikes from top providers on their 18 and 24-month deals.
Based on average amounts from the Which? 2023 broadband survey, BT and EE customers who took out a contract in January 2023 could see some of the highest average price hikes of £147.43 and £147.31, while Vodafone and Plusnet customers could see rises of £122.38 and £117.87 respectively.
TalkTalk customers could see a smaller hike of £76.09 on average over the course of shorter 18-month contracts.
Virgin Media did not use inflation-linked price hikes in 2023 but some customers' prices did increase by an average of 13.8% per cent due to ad hoc price rises, according to Which?
Which? argues that it is unfair for consumers to be signed up to deals which do not give them certainty about how much they can expect to pay over the course of their contract, and then face exit fees if they want to leave early.
How can I cut broadband and mobile costs?
The simplest way to save more of your hard-earned cash is by switching your supplier when your contract expires.
If you're outside the minimum term of your contract then you won't need to pay a cancellation fee – and you might be able to find a cheaper deal elsewhere.
If you're still in your contract period, you might be charged an exit fee.
But don't just switch contracts because the price is cheaper than what you're currently paying.
Take a look at how much speed you need for broadband or how many minutes and texts, as well as how much data you're using on your mobile, to find out which deal is best for you.
Use comparison websites, such as MoneySupermarket and Uswitch to compare the best tariffs and phone prices.
If you're happy with your provider then it might be worth using your research to haggle a better deal too.
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It's also worth checking out some providers which don't charge mid-contract price rises.
These include Voxi, Lebara, Giffgaff, Smarty, Lyca Mobile and Asda Mobile.
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