The start of the year can be a testing time for household finances after the excesses of Christmas and other festive celebrations. It’s also a time when we start to home in on our financial objectives for the year, such as buying a house, car or putting money aside for a holiday. This year, it may be a little different. Inflation, the natural rise in prices over time, has reached a 30-year high as food, fuel and transport costs soared. Along with tax changes and rising energy costs, 2022 has been dubbed the “year of the squeeze”.
To help shield yourself from inflation, here are a few tips:
Inflation is expected to exceed 6pc next year, putting pressure on the Bank of England to increase central bank interest rates. This means those with an average tracker mortgage will likely pay hundreds more. Opting for a fixed deal now while the rates are still low can save you money in the long term, especially if you don’t plan on moving house soon.
If you’re ready to buy a house but are waiting for the market to cool, gain some professional advice on whether you should make a move now or hold your nerve. Affordability may be impacted if potential buyers wait too long and interest rates increase.
While the interest rates are still low and the buying power remains in the market, consider listing your home for sale.
It’s possible that inflation could cause interest rates to increase, which means more people will shift to renting instead of buying. If that’s the case, it’s better to move to a new rental now rather than wait.
In the current climate, investors and landlords may decide to re-mortgage their portfolios while interest rates are still relatively low. They could also consider growing their portfolio and buying more homes to let out.
The energy price cap is anticipated to rise yet again in April this year, following a surge in the price of wholesale gas prices. Consumers are advised to stick to default tariffs that are protected by the cap – even though the cap is rising. Fixed deals tend to be far more expensive as providers look to recoup losses.