In just two weeks’ time Chancellor Rishi Sunak will unveil the autumn budget, which could see more tax increases for UK consumers.
Already households are facing rising inflation and increasing energy prices, with income tax payments set to increase in the spring and suggestions that council tax will also be increased. This means even those who were fortunate enough to not have to rely on savings, go into debt or take repayment holidays over the past 18 months will likely have to revaluate their finances to prepare for the price rises. Here we look at how consumers can prepare their personal finances for the next 12 months.
For many homeowners one of their biggest monthly outgoings is their mortgage repayments. Borrowers on their lender’s standard variable rate (SVR) will likely be able to reduce their monthly repayments simply by remortgaging into a fixed rate deal. Right now, rates on two and five year fixed rate remortgage deals are competitively low and homeowners can lock into rates from as low as 0.84%. To give an idea of how much switching from an SVR onto a fixed rate deal could lower monthly repayments, a homeowner with a £200,000 mortgage on a 25 year term on today’s average SVR of 4.41% would incur monthly repayments of £1101.47; if the homeowner locked onto a two year deal at 0.84% their repayments would be £739.35. Now is, therefore, the perfect time for homeowners to check what mortgage rate they are paying and consider locking into a fixed rate deal or speaking to a mortgage broker to see if they can lower their mortgage repayments.
Another significant outgoing for many consumers is debt repayment. Consumers with credit card debt may be able to transfer the debt onto a 0% balance transfer credit card, which will provide an interest-free period in which to repay the outstanding balance, often making it quicker and cheaper in which to pay off the credit card debt. Consumers considering moving their credit card balance to a 0% balance transfer credit card should, if possible, aim to repay the debt in full before the interest-free period ends. The longest interest-free period on balance transfers is currently 31 months, and consumers can compare all these types of credit cards by visiting our 0% balance transfer credit card comparison chart.
Alternatively, consumers who have debts with various lenders could choose to consolidate their debts into one personal loan. Consolidating debts into a personal loan can reduce monthly repayments, as well as helping to make the debt more manageable as borrowers are not having to juggle various debts with different lenders. Rates on personal loans are extremely competitive at the moment, for example someone looking to borrow £5,000 over three years can get a rate from as low as 3.3% APR, while rates from as low as 2.8% APR are available on loans of £7,500 over a five-year term.
Although insurance policies, such as home insurance or car insurance, are essential outgoings consumers should make sure they are not paying more than they need. Saying this, when choosing an insurance policy, consumers should ensure that they are fully covered for their needs, which may involve choosing a slightly more expensive policy, but which will provide all the cover required.
Along with looking for ways to reduce monthly outgoings, consumers with savings should review their savings accounts to make sure they are getting the best returns possible. The past few months has seen average rates on many savings accounts start to rise. This means that savers with an easy access savings account may want to compare accounts in our easy access savings account chart to see if they can get a better rate by switching account. Meanwhile, savers who locked their money into a one year fixed rate bond last year may find that they are able to get a better fixed rate bond rate now than was available a year ago. With inflation rising, however, savers will find that no savings account rate can currently match or beat the inflation rate which means they may find the value of the savings is eroded in real terms.
Savers with an emergency savings fund already saved into an accessible savings account, and who have an excess amount of savings, could consider investing as well. Investing is a riskier option than putting money into a savings account as it could result in the investment not making any returns or, in some cases, the investor could lose all their money, including their initial deposit. In return for the risk, investments can result in investors making a better return on what can be earned on a savings account. For more information about investing visit our how to invest page or look at our stocks and shares ISA comparison chart.
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