It’s hard to be of good cheer with rail union boss Mick Lynch threatening to wreck the first normal Christmas in three years after those Covid lockdowns. But please, don’t give into despair.
There are some positive signs for the year ahead. 2023 may not be quite as bad for your personal finances as 2022.
It’s hard to believe, as the cost of living crisis forces millions to choose between eating and heating, despite all those costly Government rescue packages.
Yet there is now a chance that inflation has peaked, with the last Wednesday’s figure showing it had retreated to 10.7 percent in November, down from 11.1 percent in October.
Fawad Razaqzada, market analyst at City Index, said one month does not make a trend but added: “Inflation in the US and the eurozone is cooling, too.”
Pensioners were hammered by the state pension triple lock suspension for this financial year, giving them a pay rise of just 3.1 percent as inflation flew to double digits.
Next year should be brighter as the triple lock is back and the state pension will increase by 10.1 percent from April.
If inflation falls to five percent as the Bank of England predicts, pensioners could receive a pay rise of double today’s inflation rate.
It may not make up for this year’s losses, but it is a positive step.
Mortgage costs have shot up as the Bank of England hikes interest rates to curb inflation, putting pressure on homeowners.
Rates touched 7 percent in the wake of former Chancellor Kwasi Kwarteng’s mini-Budget, but are now retreating towards 5 percent.
Estate agency Chestertons predicts a slight house price dip in England and Wales next year of less than 1 percent, followed by growth of 1.3 percent during 2024, rising to 10 percent in London.
Head of research Sebastian Verity said: “The number of forced sales will be relatively small and low supply and high strong underlying demand will insulate the market from any dramatic falls.”
With stock markets, bonds, gold and Bitcoin all plunging in 2022, there has been no hiding place for investors but they should not despair, said Darius McDermott, managing director of independent fund research house FundCalibre.
“Today’s beaten-up markets look relatively cheap and 2023 could be the year things start to get better rather than worse.”
Rising brought savers some long-awaited good news in 2022, with the BoE hiking bank rate again last Thursday to 3.5 percent.
Savers can now can lock into fixed-rate bonds paying up to 4.5 percent a year, three or four times what they got last year.
That is still roughly half the inflation rate and savings rates may not rise much higher now, said Anna Bowes, founder of Savings Champion. “It could be worth taking advantage of last week’s rate hike to lock into a best buy fixed-rate bond today.”
In another piece of good news, 22 million Britons holding Premium Bonds are going to enjoy £80million more prizes every month from January.
National Savings & Investments (NS&I) has increased the annual prize fund rate to 3 percent, up from just 1 percent in May, giving more savers that winning feeling.
Perhaps the biggest turnabout this year is in annuity rates. A year ago, a 65-year-old with £100,000 of pension could buy a single life annuity paying for maximum £4,800 a year. Now they can get more than £7,000 a year, again, thanks to rising interest rates.
That’s an extra £2,200 every year for the rest of their lives, worth £44,000 over a 20-year retirement, said Canada Life’s technical director Andrew Tully. “Sadly, this will not help existing annuity holders, but retirees hunting around for a lifetime annuity today are getting a much better deal.”
We all still have plenty of worries but there are some reasons to be positive. Hopefully there will be more as 2023 progresses.