Moneysupermarket.Com Experts Reveal Their Personal Finance Predictions for 2012
CHESTER, England, December 20, 2011 /PRNewswire/ --
2011 continued where 2010 left off with consumers feeling the pressure of rising cost of living and further austerity measures on the nation's finances. With 2012 just around the corner, experts from Britain's number one comparison site, MoneySupermarket.com offer their predictions for the year ahead:
- Savers need to fight back in 2012 if interest rates stay low
- Competitive mortgage rates will make it easier for those wanting to buy their own home in 2012
- Payday loans set to continue to be popular in the New Year
- Market competition for balance transfer credit cards set to continue
- Regulation coming into effect from December 2012 will affect Car and Home Insurance and prices will continue to rise in 2011
- 2012 set to be a year of change in the energy market
- Networks will be put to the test with events such as the Olympics next year
Kevin Mountford, head of banking at MoneySupermarket.com said: "Savers have suffered from low interest rates in 2011 and Mervyn King believes that inflation will fall to its two per cent target in 2012, so there will be no urgent need to increase interest rates. Again grim economic figures will also factor and as such it may be 2013 or beyond before we see any move on the current 0.5 per cent rate.
"Market data is already showing that due to continued uncertainty consumers are either saving more or paying down debt. As increased winter fuel bills and the rising cost of living kick-in, many more households will be hitting their financial tipping point so it is imperative that we try and fight back.
"Although many are actually trying to take some control I suspect the majority of households could secure better value from their products and services but they need to make some effort and research options across the likes of banking, insurance, utilities, telecoms and every day shopping. It would be great to think that this effort frees up some income so consumers cannot only continue to save or pay down debt but have a little fun as well."
Clare Francis, mortgage spokesperson at MoneySupermarket.com said: "In 2011 we saw increased demand for longer term fixed rates increases, with five year products being particularly popular. This was largely fuelled by pricing as the cost of fixing for the longer term came down making these mortgages more attractive to borrowers. I'd expect five-year fixed rates to remain popular in 2012 (assuming they stay competitively priced) as people look to secure a low mortgage rate and protect themselves from future interest rate rises.
"That said, for those willing to take a bit of a gamble, tracker mortgages are also likely to be an attractive option given the short term outlook for interest rates. With many economists expecting the Bank of England base rate to remain on hold at 0.5 per cent until 2013, a large number of borrowers will be happy to opt for a variable rate mortgage in order to benefit from a lower rate of interest now.
"While savers are suffering because of the low interest rate environment borrowers are benefiting and cheap mortgages are offering a reprieve to millions who are struggling to make ends meet. However, while no one is expecting base rate to shoot up quickly, it will start rising at some point. There is a risk that this could cause problems for many of those currently on their lender's standard variable rate as their monthly payments will rise.
"We've seen an increase in the number of mortgages available to those with smaller deposits over recent months. This is good news for those who've been stuck on their lender's SVR as more people will now be able to re-mortgage and lock into a fixed rate deal to protect themselves from interest rate rises. It's also good news for first time buyers.
"The housing market is likely to remain subdued in 2012. This coupled with more competitive mortgage rates for loans up to 90 per cent of the property's value should make it easier for those wanting to buy their own home, to take their first step onto the property ladder."
Hannah- Mercedes Skenfield, head of credit cards at MoneySupermarket.com said: "2011 has been a competitive year for providers especially with Barclaycard vying for the number one spot in balance transfer for most of the year. We saw the launch of a 24 month balance transfer card in 2011 and I would expect a similar amount of competition in the market in 2012, particularly at the start of the year when lenders will look for people who are refinancing their debt. Barclaycard's dominant position has led to innovation in other areas to attract the best customer, for example cashback and low balance transfer fees, and I expect this to continue with significant momentum into 2012. Attracting and retaining the best customers will remain a focus for providers in the New Year, therefore it is more important than ever for consumers to protect their credit rating in 2012.
"I also expect to see further innovation; contact less cards will continue to be rolled out, and we will likely see further use of mobile payment technology."
Tim Moss, head of loans at MoneySupermarket.com said: "Unsecured loans will go from strength to strength in 2012 after rates bottomed out in November 2011 at 6.1 per cent. I can't see rates getting any lower than this. If we don't see a double-dip recession, Banks will stay comfortable with their scorecards and will still look to accept 40 per cent of applicants for a loan.
"The popularity of Payday loans will continue to increase into next year as people still feel the squeeze on their finances. Some of the larger and more established banks will look at Payday loans as a possibility and look to enter the market in 2012 with lower costs or more ethical offerings. Payday loans will sit and nestle in with overdrafts as a way of financing month to month."
Pete Harrison, insurance expert at MoneySupermarket said: "2011 was tough for both customers and insurers as premiums increased by around 30 per cent. In 2012, we may see further increases but not as drastic as those seen in first half of 2011.
"The EU Gender directive comes into play from December 2012 which will impact premiums, and we expect to see insurers hold on by freezing female drivers premiums for as long as possible, before a considerable hike in premiums from December. We will not see male driver premiums decrease to ensure parity gender pricing.
"Young drivers will continue to be an issue as they cannot afford to pay the high premium. It has been statistically proven that young drivers are more likely to have accidents. The solution for some insurers is to use telematics as it gives an individual premium based on driving behaviour, so we expect to see more providers using this as a risk profiling tool. Fraud and the high number of personal injury claims will also remain a key issue for insurers, which is why increased premiums are being felt by customers. The Government has called for a reform of the no-win, no-fee claim culture which now exists, and this needs to happen quickly. We also encourage the DVLA to give the insurers and price comparison sites licence data to help give customers accurate premium calculations.
"Against all this change within the industry, the key point remains that customers need to shop around at their renewal to find the most suitable product at the right price as insurers are taking advantage of customer apathy."
Julie Owens, head of home insurance at MoneySupermarket.com said: "I expect buildings only premiums to continue to rise, following a 10 per cent increase this year, as insurers struggle with the payouts from the past two severe winters. Insurers are nervous about extreme weather event occurring more frequently,, particularly in places where there has been no previous flooding history which will impact premiums further in new areas. Otherwise, home insurance premiums over the last year have been largely resilient to inflationary pressure and I believe this will be maintained into 2012, with insurers looking to attract the right kind of new business customer via generous discounts and product incentives.
"Insurers will also be wrestling with how they change their pricing models to comply with the ECJ ruling preventing the use of gender as a risk factor to price insurance premiums from 21 Dec 2012. Whilst gender does not impact home insurance to the same degree as motor and we don't yet know what specific changes insurers will make, it is clear that male premiums will not decrease to ensure parity gender pricing. Again, it is vital that customers shop around to find the right cover at the best possible price."
"The tenure of our homes will continue to change in 2012. I predict a busy buy-to-let market, as the affordability of homes, together with the need to save sizeable deposits, continues to impact levels of home ownership. The resulting strong rental demand will indicate a further rise in the number of contents only insurance policies in 2012. The 2012 Olympics will also present a tempting opportunity for London homeowners to make money from renting out rooms to tourists. But before cashing in, I would urge customers to let their insurer know of their plans - whilst some are happy to provide cover for temporarily renting out your home at no additional cost, others aren't and you could fall foul of this should you fail to check with your insurer first. "
Scott Byrom, energy expert at MoneySupermarket.com said: "2012 is set to be the year of change for the energy market as suppliers move away from the heavily criticised "door to door" selling and fold to demands from Ofgem to simplify bills and energy tariffs.
"British Gas has already set the bar by reducing its offering to only three tariffs helping consumers to switch more easily and find a better deal. The reduced number of tariffs does trigger concerns around competition but I fully expect smaller suppliers to take full advantage and continue to encourage new customers in order to meet their growth objectives.
"Government initiatives such as "Big Energy Week" in January and "Green Deal" to launch in October 2012 are set to push the energy market harder than ever before to encourage customers to do all they can to reduce their energy bills and use less energy. "Green deal", the biggest initiative in a generation for the energy market, is looking to help consumers secure loans to help improve their property's energy efficiency with the debt being tied to the property and not the individual.
"With regards to pricing, the market indicates we could see price increases in April/May inevitably, and early estimates suggest an increase of around 10 per cent for both gas and electricity is likely."
Broadband and mobiles
Mike Wilson, manager of broadband and mobiles at MoneySupermarket.com said:
"In the broadband market, I expect the battle for new customers to continue into the New Year. 2011 was dominated by the price leading providers (such as Talk Talk and PlusNet) offering stronger and stronger introductory deals. The challenge for customers in 2012 is to make the most of these offers and take advantage of the savings they can make.
"Speed will continue to be a problem, with the likes of Virgin Media and BT trying to drive super-fast broadband, but in reality I can't see there being any major advances in UK broadband speeds. The gulf in service between urban and rural areas will continue: with the main urban areas, such as London, getting access to super-fast connections and external Wi-Fi, while those in rural areas are left wanting.
"It will be interesting to see the impact on the networks in 2012 when people flood in from across the world to watch the Olympics. The current structure is seemingly under pressure as it is, with mobile customers across the board complaining of poor signal and slow data speeds, and with the additional influx of people this will put real stress on the networks, especially in London.
"The battleground for handsets should be incredibly exciting next year, with the expected arrival of the iPhone 5 and iPad 3. There is also likely to be a new selection of Android operating phones onto the market whilst Nokia's new range of Windows based mobiles have started promisingly. I would also expect to see a focus on network strength at the point of purchase. With price rarely a major differentiator in the market now, things like availability of signal will become a key driver in the decision making process."
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