During his Autumn Budget Statement, the Chancellor, Philip Hammond delivered some worrying news. The Office for Budget Responsibility reduced the economic growth forecast for 2017 from 2% to 1.5%. Moving into 2018, it doesn’t look much better. Should we be worried and how can we prepare?
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Economic growth will average around 1.4% from 2018 to 2022. In addition to this, Government borrowing will increase, and UK national debt will remain high, though it will drop slightly from 86.5% of GDP in 2017 to 86.4% in 2018.
Will it all be doom and gloom in 2018?
Interest rates
The market correctly predicted that The Bank of England’s, Monetary Policy Committee would increase the Bank’s base rate from 0.25% to 0.5%. Mark Carney, himself has alluded that we will see another two or three rate rises in the next few years.
What does this mean for you?
Well, if you have a mortgage, an increase in the base rate, usually means that mortgage providers will increase their rates as well. If you haven’t done already, you should review your situation to see if you can move onto a better fixed rate deal.
If you are thinking of moving your mortgage, it is advisable to speak to an experienced financial advisor, such as ourselves, who can offer guidance on the best route to take.
If you are lucky enough to be in the situation where you don’t have a mortgage and are able to save. Interest rate rises work in your favour. Moving into 2018, we recommend that you review your savings to see if they are in the best place for growth. This includes looking at how your pension is performing.
Property prices
Research by the estate agent, Savills, shows that house price growth will slow by half in 2018. Dropping from 2% this year, to 1% in 2018.
Several factors are causing this fall. The main ones are Brexit, interest rate rises and mortgage constraints.
However, it is not all bad news as they predict there will be a return to growth in 2019/20.
The one thing that will remain to loom over the housing market is Brexit. The uncertainty around what the ‘divorce deal from the EU’ will contain and what it will mean for the UK population and workers, will continue to impact on household budgets.
If you hold a property portfolio and are looking to add to it, or are looking to build one from scratch, and are willing to look outside of London and the South-East, there are areas where house prices will remain relatively low. These include areas in Wales, Scotland and the North-East.
If, however, you are only interested in London properties, the cheapest places to buy in London, according to estate Foxtons, are; Barking and Dagenham, Bexley, Havering, Newham, Croydon, Sutton, Greenwich, Lewisham, Enfield and Redbridge.
Brexit
As we’ve already mentioned, the effects of Brexit will continue to rumble on into 2018. The uncertainty surrounding EU national’s status once we leave the EU will remain.
A statement made by the OECD shows that they expect the UK unemployment rate to rise to 5.3% in 2018 from its low of 4.3%.
Plus, they foresee that household saving will drop to 2.2%. All this may impact on the UK inflation rate.