I’ve got a feeling that 2016 could be the year where we say goodbye to bargain basement loan rates.
On the flip side it could mean that tide starts to turn in favour of beleaguered savers who have had to contend with paltry interest returns for what must seem like an eternity.
Once the fall in the cost of fuel prices is taken out of the inflation numbers we will start to see CPI pick up again in the spring and then the question will increasingly be – when will UK rates rise?
Savers have suffered at the hands of the Bank of England’s low interest rate strategy for almost seven years so this faint hope that things may start moving will be music to the ears with their hard earned nest eggs currently earing a pittance.
There are a number of key changes in the pipeline for savers this year too.
Firstly, the maximum sum covered by the Financial Services Compensation Scheme has just been cut (from 1st January) by £10,000 per person, therefore sole accounts are now covered up to £75,000 and for joint accounts the protection limit is £150,000.
Something more exciting and rewarding for savers is the forthcoming Personal Savings Allowance (PSA) which from April will allow savers to receive a generous portion of their interest totally free of tax.
Currently all bank and building society interest is paid net – after 20% has been deducted (apart from ISAs), however under the PSA basic rate taxpayers won’t have to pay tax on the first £1,000 of savings or current account interest earned each year – for those in the higher rate tax bracket (earning between £42,701 and £150,000) the annual allowance will be £500.
As a result of this move it’s expected that around 95 per cent of savers will receive their interest tax free – that equates to an instant boost of 20% on their savings income.
April 2016 also sees the introduction of the Innovative Finance ISA which will allow Peer to Peer investors to shelter up to £15,240 as part of their overall ISA allowance.
Levels of unsecured borrowing on credit cards, personal loans and overdrafts have been booming on the back of rising consumer confidence
There’s a growing feeling that borrowing interest rates may well have bottomed out and with Mark Carney intimating that he may rein in borrowing by forcing banks to keep higher levels of capital, borrowing costs are likely to become more expensive in 2016.
Mortgage business is predicted to remain brisk this year but a lack of housing supply, low interest rates and greater lending availability will see property prices remain high during 2016, an increasing issue for would be first time buyers.
The introduction of a 3% Stamp Duty levy for Buy-to-Let investors and second homeowners is predicted to spark a surge of activity in the housing market pushing property prices higher this spring as buyers use the narrow window of opportunity to beat the deadline before the changes come into force in April.
New Year – more new names
There’s been no shortage of competition in the personal finance sector over the last couple of years and it’s a trend that looks likely to continue.
New digital banks including Starling Bank, Atom Bank and Tandem Bank are all waiting in the wings and ready to challenge the high street giants.
These new, online only mobile banks – referred to by some as ‘neobanks’ with state of the art financial technology aim to disrupt the banking market over the course of the next decade, so expect to see some new names touting for your custom during the latter part of this year.
Let’s hope this added competition drives better rates and services for all.