6 min read

What’s going to happen in the world of money this year?

22 December 2017

What’s likely to change in 2018 and will we all be richer or poorer as a result?

In a world where almost no one expected Trump to become president, Twitter to extend it's character limit or Boris Johnson’s dad to go into the ‘I’m a Celebrity’ jungle, it feels like we’d be foolish to try to make predictions for next year. Predictions are so very 2016 anyway.

Instead, think of these more as informed guesses, based on expert comment and analysis, and events that began in 2017. Here’s what might happen to our economy and your money this year.

Interest rates could rise

Each month the Bank of England’s policymakers get together and decide whether to raise the base rate – a rate that many lenders use to price their mortgages and loans.

They raised it a fraction at the end of 2017, the first hike for a decade. Many people predict further rises this year and Ed Stansfield, chief property economist at Capital Economics has predicted 3 hikes across 2018.

He suggests the rate will reach 1.75% by the end of 2019, though, so he is definitely not expecting rates to reach 2007 levels (which peaked at 5.75%) any time soon.

But if you’re worried about rising rates then now could be a good time to fix or to consolidate debt. See if you could save by switching to a fixed-rate mortgage before rates go up again, or lock in that first mortgage deal sooner rather than later.

More banks will close

Do you like using a banking app or website? Good, because the chances are you’ll need to use that kind of tech even more this year.

Lloyds Banking Group, RBS and Yorkshire Building Society have all announced further branch closures in the next 12 months, with more than 300 branches closing across the country.

For many people, that will mean there is no longer an actual bank in their town. The good news is that with apps and online banking you should be able to stay on top of your finances, the bad news is that you may not have a choice.

Regardless of which bank you do business with, you should be able to manage your current account via a Post Office branch, including checking your balance, paying money in and making withdrawals.

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House prices could rise

The thing with house prices is that no one ever expects them to fall but sometimes they do – as they did in the crash of 2008. However, with high demand and a housing shortage, a lot of analysts reckon prices will continue to rise in 2018.

Savills predicts growth of just 1% on average this year, with 14% growth by 2022. Meanwhile, PwC has predicted growth of 3.9%, fuelled by a shortage of new houses coming to market.

On balance, growth of some sort seems likely, although that’s obviously not guaranteed. If you’re a first-time buyer then now could be a good time to take the jump, especially since the government has ended Stamp Duty for new buyers.

Bitcoin could go mainstream

Cryptocurrencies have seen a huge, vast, OMG-they-can’t-keep-climbing-but-they-are spike in value over the last 12 months. So there’s a good chance that Bitcoin and its competitor digital currencies could become even more mainstream this year.

Of course, they might instead crash and burn - there are lots of people saying this is simply another bubble.

However, bookmaker Betway had Bitcoin at 11/8 to break $20,000 (yes, that is the price to buy one single Bitcoin...) before the end of 2018 and 1/2 that McDonald’s will be accepting the currency by then. How many burgers might one Bitcoin buy?! Maybe we’ll find out this year.

Chocolate bars could cost over £1

Yes, the individual chocolate bars. A spokesperson for the grocery comparison website mySupermarket.com said: “The cost of a chocolate bar has risen by 13 per cent since 2016. If this rate continues we could be paying over £1 for a regular bar in 2018.”

Maybe it’s best to stock up now. Even if prices don’t rocket, you’ll never regret having a drawer full of emergency chocolate.

We’re not going to grow the economy that fast

The think tank (OECD) has predicted that the UK economy will slow rapidly in 2018 as the country moves closer to Brexit. This means high inflation, stagnant wages and we’ll all be spending more of our savings.

High inflation coupled with stagnant wages effectively means getting a pay cut. This is because when your wages don’t rise as fast as inflation, you’ll have less money to spend in real terms.

Not everyone is so pessimistic about 2018 though. An annual survey of businesses carried out by the CBI and Pertemps shows that more than half of businesses plan to raise pay at the rate of inflation or above. So many of us should be able to keep up with the rising cost of living. However, stagnant economic growth may mean the government tightens its purse strings further, which will affect everyone.

To end on a cheerier note, here’s some of the fun stuff you can look forward to in 2018:

Fun stuff that will (probably) happen in 2018

  • A royal wedding. Okay, there’s no day off work but who doesn’t love a big do and a commemorative mug?
  • The World Cup! And England is starting in a group that they stand a half decent chance of beating. Woop!
  • The Winter Olympics. Because even if you’re not into sports, we all love the daily medal tally and that one where people fly through the air only with skis on.
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