As thoughts turn to New Year celebrations, with the help of moneysupermarket.com, we take a look at personal finance predictions for 2011.
There’s no doubt that 2010 has been a difficult year, with the Government taking severe measures to cut the budget deficit putting pressure on people as well as the cost of living rising, people are having to make tough financial decisions.
Whether it be energy prices, mortgage interest rates or home insurance, we all have to deal with a myriad of financial matters as part of our day to day living.
As we head into the New Year though, what are the experts views on these personal finance matters?
Firstly the expectation is that most financial services and products will rise in cost in 2011.
The Bank of England base rate is predicted to rise which will increase the borrowing costs on mortgages. Of course the flip side of this will be an increase in savings accounts rates to helps savers.
Insurance products, including home insurance and car insurance will rise, as are energy prices likely to rise.
Banking – First off there will be a number of new Banks in 2011. As Kevin Moutford at moneysupermarket.com says “The likes of Tesco, NBNK and Virgin Money will be looking to launch their own branch networks and Metro Bank has plans to increases its network, so the high street could look very different come the end of the year. This change could see banks upping their game to offer the best service which will only benefit consumers.”
Banks will continue to offer incentives to attract new customers, including cashback offerings but as Mountford adds he “would like to see more creativity in helping encourage switching among UK consumers.”
Mortgages – Kevin Moutford comments “A small movement in Base Rate is expected sometime in 2011 which will impact heavily on the cost of monthly repayments and could cause problems for those who have become used to lower rates.
First time buyers will continue to struggle to get a foot on the property ladder despite reductions in property prices.”
He further comments that “the best rates will still be reserved for those with large deposits” and that “buy to let market is also expected to grow significantly during 2011 as landlords capitalise on the strong demand for rental properties. ”
Savings – Low interest rates have hit savers hard. An increase in the base rate will therefore be welcomed as will new providers and new products hitting the market – from such as Tesco Bank and Virgin Money. Consumers will need to be very careful to make the most of their money.
Credit Cards – Having a good credit history will continue to be vital to be able to access cheap credit. Competition amongst credit card providers will remain strong.
Loans – Tim Moss, head of loans, comments “I expect providers in the loans market to become more aggressive and competitive with their offers in 2011.
From a consumer perspective, there is little appetite to borrow with the focus instead on paying down debt – a view supported by a number of consumer indices. The beginning of the year will be an exception to this as many consumers who have overspent during the festive season will be looking to consolidate their debt.”
Car Insurance – an increase in personal injury claims, insurance fraud and claims involving uninsured drivers, have resulted insignificant rise in car insurance costs. Tom Sweeney, head of car insurance at moneysupermarket.com expects “that premiums will rise by a further 20 per cent in 2011.”
This makes “shopping around for car insurance has never been more important, and consumers will benefit from renewing their policies as early as possible. Using moneysupermarket.com consumers are able to make an average saving of £286 on their policy.
It’s crucial people don’t auto renew with their existing insurer without researching other options available to them first.”
Home Insurance – premiums have been on an upward trend over the last couple of years and as Julie Owens, head of home insurance at moneysupermarket.com, comments she expects “this trend to continue into 2011 – insurers are becoming increasingly concerned about the effect of climate change and the risk of flooding which can be costly for them to cover.
Intense weather events such as the flooding in Cockermouth and our winter cold snaps are becoming more frequent; the cost of repairing the water damage to homes, burst pipes and snow damaged roofs and gutters will inevitably cause premiums and compulsory excesses to continue to rise.
Despite this, buildings and contents insurance remains fantastic value for money, starting from as little as £175 a year for a combined policy. It’s the best investment you can make to protect what is arguably the biggest financial asset you have.”
Energy – Ofgem are investigating recent energy prices, but even if the results of this mean a short term correction in energy prices, it’s unlikely to have a lasting impact. As Scott Byrom says “it seems the only way is up for energy prices in the foreseeable future, so people should stay savvy and ensure they are always on the best value deal for their region and usage. Those who have never changed their supplier could be paying as much as £386 more than they would be if they were on the cheapest energy tariff available.
“The lowest priced tariffs are the online products offered by the energy companies. These tariffs enable customers to monitor their usage and spend by providing regular meter readings for their online account.
Bills are also paid by monthly direct debit, meaning the cost is spread out evenly through the year. This is by far the best option for consumers looking to save money and get away from hefty quarterly bills that land on their doorsteps after the costly winter months.”
Broadband and Mobiles – Broadband is now seen as vital for many, in fact to put this into some perspective, a recent survey has shown that Brits would give up alcohol and chocolate rather than broadband.
2010 was certainly the year of the PC tablet, with the likes of the iPad being dominant. 2011 will see a shift back to focus on smartphones. Unfortunately though as Mike Wilson of moneysupermarket.com says “the demand for these must-have handsets is so great that it’s unlikely we’ll see more competitive pricing.” Prices are expected to remain largley unchanged, albeit there maybe some positives hitting the market from the merger of T-mobile and Orange.
Opting for a bundled package of home phone, broadband and TV with one provider will most likely continue to offer the best value for money.