28 December 2016

At least no one can say that 2016 was boring...

World-shaking events like Brexit and the election of Donald Trump as President of the United States have left a lot of questions waiting to be answered, with more unknowns than usual at the end of the year.

Many of us have been left wondering how it will affect us and our finances, especially when it comes to the cost of holidays, changing house prices for both buying and letting, higher living costs, and interest rates. Let's take a look at some of the areas affected by the financial ups and downs of the past year.

Holidays

After the Brexit referendum in June, the world's largest travel company, Tui - which owns First Choice and Thomson - cautioned that UK holidaymakers will face higher travel prices in summer 2017 thanks to the falling pound. 

As it stands, the pound is the weakest it's been since 1981, and holidays are more expensive than before for those heading to the EU, as travellers will pay more for accommodation priced in euros. The cost of a 4-person holiday to Europe could rise by £230 according to analysis by the Treasury.

House prices

It's not particularly surprising that house prices in London have been most affected by the EU referendum result. The housing market in the city slowed down in the early autumn, with the number of buy-to-let mortgages granted to home owners down by 20% on the previous year, according to the Council of Mortgage Lenders. And annual house price growth slowed slightly towards the end of the year, dropping from 4.6% in October to 4.4% in November

House prices in the outer parts of London are rising though, and other areas in the country are seeing some activity and growth as well, with rising house prices in places like Essex and Berkshire.

Costs of living

A weaker pound makes imported goods more expensive. If you're a fan of French cheese, Spanish wine or Japanese electronics, for example, that weakness is felt in your wallet. 

According to Reuters, Sterling has dropped around 15% against the US dollar since June 23, leading to price rises in a variety of goods, from computers to clothes, to food. On the positive side, since there is strong competition amongst UK supermarkets: no chain wants to be the first to raise prices, which has benefited the consumer so far. 

We'll see if any of the chains break ranks in the new year. In an interesting case, Tesco refused to increase the price of Marmite when Unilever put the price up, instead opting to just stop selling it instead. That's one way of dealing with the market fluctuations!

Borrowing

UK interest rates are now at a record low of 0.25, following the Bank of England's decision this year to cut the base rate by a quarter of a percentage point for the first time in seven years. 

So if you've a variable 25-year repayment mortgage on a typically priced home of £211,000 having taken a 20% deposit into account, you could find a monthly reduction on your payment of £22. And we all know that every little bit counts, so that's not a bad discount at all.

What to look for in 2017

2017 will undoubtedly be a year of more change on the back of what's already happened around the globe. Companies have begun shifting prices to make up for the falling Sterling - look to Apple, who have just raised prices on their phones and laptops, and Lego, who have announced that they will raise prices beginning in January of the new year, with more to follow if the pound doesn't recover.

On the positive end of the spectrum, the Bank of England recently announced measures meant to stimulate the economy, including a £100bn scheme to force banks to pass on the low interest rates to households and businesses. This could be great for small business owners and home buyers.

Make planning a budget your New Year resolution

For now, we'll just have to wait and see what the coming year holds. But a time of change is the right time to start planning ways to stretch your money further. Start right here with our helpful budgeting guide. Budgeting is always a good idea, no matter what's happening!

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