2023 has been a tough year as families dealt with the toughest cost of living crisis this country has seen in 40 years.
We have seen interest rate increases over the past 12 months creating additional financial concerns for the United States 800,000 homeowners on fixed-price deals expire in 2024 and 1.6 million will have their deals end in the new year.
The UK inflation rate has fallen to its lowest level in more than two years, but the cost of living is still rising rapidly here.
Prices rose by 3.9% in the year to November, in contrast to the United States and the euro zone where inflation fell to 2.1% and 2.4% respectively.
But there is hope on the horizon, says financial expert Peter Komolavy.
Peter is the author of Money Basics: How to Become Your Own Financial Champion and runs the Money Talk YouTube channel and podcast.
“This year has undoubtedly been very difficult – living with the adjustments we were surprised to make in 2022,” he says. “It will continue to be difficult. Households will still need to tighten their belts in 2024, but I am optimistic that next year will be better than the last.”
Here Peter, who recently appeared on ITV’s Lorraine, examines how money will impact all areas of our lives, what it means and what we can do:
Will interest rates rise or fall?
“Interest rates will remain high for most of next year.
“With interest rates rising, the cost of borrowing remains high, which is worrying. Less than one in four people have £100 in their emergency fund, so many people will turn towards things like overdrafts, credit cards and other debt facilities.” To overcome herself.
“It may be a good time to combine a mix of debts, such as credit cards and overdrafts, from personal debts into one payment and find the best interest rate. If you have a credit card worth more than £4,000, and you are earning the minimum £10 payment It will take 100 years to pay it off. So you should use any card selectively. ”
“But of course, this is easier said than done – in light of the cost of living crisis. Consumer debt has skyrocketed with more people using credit cards just to cover their monthly expenses. But it’s not free money and will cost you much more in the long run – if you don’t pay it off quickly.
“The Office for Budget Responsibility expects inflation to fall to 2.8% by the end of 2024, which provides a light at the end of the tunnel.”
Will the housing market slow down?
“While the government in its autumn statement announced measures to boost housing stock, I believe house prices will slow as mortgage rates are expected to remain high.
“There are a lot fewer properties being sold now on the market as a by-product of interest rates, and I think because we’re seeing higher interest rates over the next year, there will be a slowdown in the property market compared to what we saw previously. There will be fewer people selling their property if they can’t get a On the asking price they are looking for.
“I still think this is a good time for first-time buyers, but – to look around there will be discounts to be had. Interest rates may be higher but the discount may make it worth it.”
“I know someone who got a £39,000 discount on a property he was looking at. The mortgage rate was high but the massive discount on the property made the numbers make sense. I think it’s a good time for first-time buyers, but others who don’t have an urgent need to sell will have to wait.” In 2024 and see what happens.”
Side hustle warning
Next year, people who make money selling vintage clothes online, or are vacation home owners, should brace themselves for a tax crackdown.
Platforms such as Vinted and Airbnb have been ordered to pass users’ income information on their sites, which can lead to people being arrested by tax authorities if they do not declare it.
Cameron Jack, a business loans expert at the Bank of England, warned: “While extra money is always welcome, some people will not be used to the tax implications of being self-employed, and could easily put themselves in an awkward position with the taxpayer.” “. money.co.uk.
What will happen to mortgage rates?
“If you’re approaching the end of a fixed rate, it’s really important to proactively talk to your provider,” says Peter. “The reality is we’re not going back to 1 or 2% interest rates, so you need to adapt to finding the extra cash.”
“My mortgage rate is now going from 1.49% to 4.75%, so I have to find an extra £210 a month to cover my mortgage. Tightening your belt and understanding budget are things we all need to get better at. Talk to your lender, Especially if you’re struggling, they can’t destroy your credit score.”
Wages change?
“The National Living Wage rises from £10.42 per hour to £11.44 per hour, providing a rise of £1,800 for full-time workers over the age of 21. The national minimum wage for younger workers will also increase to £8.60 per hour – which is a £1.11 £ hourly wage increase.
“National Insurance has been reduced from 12% to 10%. This will save those earning an average salary of £35,000 on £450 a year.
“Although these changes will help millions of families reach different ends of the income spectrum, I am not sure they will be enough to offset the increased costs of living that most of us have to bear – due to energy prices and rising mortgage costs.
“I think the majority of people won’t see any difference at all — and they’ll still be a little worse off. The hope is that we can get into a more competitive market in 2024. But a more competitive market doesn’t necessarily translate into higher wages for people.”
“According to the Office for National Statistics, we were expected to see an increase in the unemployment rate until 2024.
“So, if the market is crowded, it will suppress wage growth, and employers can reduce the amount they offer because they have a lot of candidate offers – it depends on the sector.”
Is the cost of living going down?
“The reason we’ve seen so much change and financial pressure on households this year is inflation.
“Towards the end of 2023, food inflation was at around 10.1%, a slow decline from previous highs of 12.2%, but it shows we are moving in the right direction.
“Inflation is basically the increase in the goods and services we buy every day, and this technically means that our supermarket should become cheaper and closer to what we remember before the cost of living crisis.
“Energy prices have fallen dramatically. I believe they will continue to fall, which will reduce the cost of living for many people.
“However, my hope for 2024 is that as inflation falls, interest rates start to fall at some point, so people should feel less overwhelmed by this time next year. But this is unlikely to happen until the end of 2024.” .
“If we can control inflation and move towards the 2% target, which the government considers within reach of most households in the country, that will ease interest rates, and the cost of living will fall as a result.” “.
recession?
“Economic forecasts indicate that we will avoid a recession in 2024.
“In the Autumn Statement, there were positive announcements for small businesses, with business rates cuts extended for another year for businesses in the retail, hospitality and leisure sectors.
“Announced measures to encourage investment by major companies should help avoid a recession.
Peter’s advice on setting up your wallet strings for 2024:
“There are people earning six figures who are struggling to make ends meet – they have higher mortgages and higher debt loads.
“That’s because it’s not so much about what you earn as how much you spend.
“Disposable income gives you room to manoeuvre. I know people with an average salary of £30,000 who have disposable income. And people who are struggling to make six figures have no income.
“The difference between the two is that one controls their spending and the other doesn’t. So it’s all about financial discipline.
“The key is to stop spending spontaneously – if that’s what you’re doing now. We’re guilty of that. I could order Deliveroo for lunch – and that’s £20 – I can’t justify that cost to me.”
“I think the people who are going to do the best in 2024 are the people who have really good control over their finances and are trying to prioritize number one, which is as little debt as possible. And number two, disposable income.”
“I am optimistic that 2024 will be better than 2023. However, we must manage our personal finances to the best of our ability.
“I believe that despite all the challenges – this will be a better year – we are moving in the right direction when it comes to inflation, which will directly impact people’s money and financial situation. Along with that, the cost of living is also coming down. – This will be a positive thing for millions of families “