Your 2017 money survival guide
It’s time to wrestle back control of your finances.
Just as we entered the spending season, the Money Charity released figures that show we have passed a landmark in personal debt levels. Collectively, we now owe more than £1.5 trillion on unsecured loans from overdrafts and personal loans to credit cards. Not taking into mortgage debt (another £1.2 trillion, give or take) every adult in the country now owes, on average, in excess of £1,000 more than they did last year.
With ultra-low interest rates, it’s all too easy to be lulled into believing this is a manageable state of affairs, but as Mark Carney, governor of the Bank of England, recently warned, inflation is due to increase to 2.7 per cent this year and with higher inflation come higher interest rates. It’s time to pay down and pay off. As quickly as possible.
With expectations of higher interest rates in 2017, and a very different sentiment today compared with the early August day when the base rate fell to 0.25 per cent, there had already been a rise in the amount of mortgage rejigging by on-the-ball homeowners and landlords at the end of 2016.
Continued uncertainty and a very competitive fixed rate market is likely to point in one direction with borrowers taking the chance to not only save money but also protect against upward pressure on rates if it gains momentum.
If borrowers like the look of a fix, particularly with existing equity of 35-50 per cent, then the next question will be how long for. The shorter the term, the cheaper the deal.
After a year of being well and truly out in the cold, the first potential base rate rise in more than nine years will be music to savers’ ears, even if it is accompanied by higher inflation rates. Savings providers have already begun to respond to the change in sentiment with recent improvements in fixed rate bonds, for example.
However, given that increased inflation isn’t expected to be as a result of a booming economy, whether the Bank of England reacts remains to be seen,”. A rise in the base rate is not the only factor when it comes to improved savings interest rates and it is often the competition between providers and their need and desire to pull in savers’ money that pushes rates back in the right direction.
There are some definites in the savings world for 2017 though, not least the return to £85,000 worth of protection from the Financial Services Compensation Scheme, the new NS&I bonds announced in the Autumn Statement at 2.20 per cent fixed for three years, the new and improved £20,000 ISA allowance as of April, as well as the new Lifetime ISA for 18-40 year-olds.
For the UK equity market, 2017 is about one word: Brexit.
A hard Brexit could well snuff out the autumn rally in sterling, especially as Britain still runs a combined annual budget and trade deficit
Elsewhere though, despite short-term turbulence as markets assess the Trump effect, markets sold off after the US election are starting to look reasonable value again, with oil reliant countries perking up with the revival in the oil price and offering long-term potential. China too, is starting to looking interesting once more as he world has underestimated how carefully this country is managing its growth
And at the other end of the scale, global warming commitments from the world’s biggest powers and huge advances in technology mean sustainable investments could truly come into their own in 2017.