personal finance forecast for 2022


If experts’ financial forecasts for 2022 are correct, Britons can expect to face higher bills as well as higher interest rates and taxes. Photo: Getty

The Brits are gearing up for 2022, with plenty of Christmas turkey and debt under their belt, as well as some financial resolutions for new Year.

Unfortunately, if the experts’ financial forecast for 2022 is correct, Britons can expect to face higher bills as well as higher interest rates and taxes.

“We go into the year knowing with certainty that either rising energy prices will push up inflation and force the Bank of England (BoE) to raise rates, or that more COVID shocks will keep inflation down. and growth, and rates will stay low, ”said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.

“While it is difficult to make predictions in this type of environment, there are some things that we can be relatively certain are slated for 2022,” she said.

Here are Hargreaves Lansdown’s ten best financial forecasts for 2022.

1. Bills will get more expensive

The energy price cap will be reviewed and announced in February, and will come into effect from April. This means that there is every chance that energy bills will increase dramatically.

Considering the huge increases in the wholesale price of gas and the enormous cost of business failures to be borne by industry, the cap is expected to increase by hundreds of pounds.

Read more: Financial resolutions for 2022 and how to make them stick

The cap is not a fixed, finite amount, it is just a cap on the cost to the average user. This means that those with large families or large or inefficient properties could end up with much larger hikes.

2. Interest rates will be higher by the end of 2022

It’s hard to see how rates could stay at 0.1% for the next 12 months, so rates will be higher at the end of the year than they are now, Coles said.

But the BoE is still juggling the weaknesses of the recovery and the hikes will be slow and steady, rather than mouth-watering overnight hikes.

3. The British will pay more taxes

The Resolution Foundation has calculated that by the end of this Parliament, tax as a share of the economy will be at the highest level since 1950 – and up by £ 3,000 ($ 3,975) per household since Boris Johnson became Prime Minister.

Payroll tax will be responsible for the lion’s share of increases, after income tax thresholds are frozen, and the Chancellor announced that 1.25 percentage points will be added to national insurance in April.

The investment tax is also increasing.

Brits who earn more than £ 2,000 in dividends outside of an ISA will be taxable and the Chancellor will increase the rate by 1.25 percentage points from April.

At the same time, the capital gains tax threshold has been frozen, so if Britons realize more than £ 12,300 in capital gains in a single year outside of an ISA, they will pay taxes.

Inheritance taxes are also expected to increase, due to the threshold freeze in the March budget.

Housing tax is also increasing, with the budget providing for a 3% increase.

4. The British will be disappointed with the increase in their public pensions

In recent years, the state pension has been increased every year in accordance with what is known as the triple lockdown. This means that it increases whichever is greater of 2.5%, CPI gains or inflation.

The end of the holiday pushed income data to an artificially high level, so the decision was made to put the triple lockdown on hold for a year and give retirees a 3.1% increase in line with inflation. of the CPI.

However, since the decision was made, inflation has risen massively, raising fears that retirees who depend on the state pension will find it difficult to keep up with rising bills in the coming months.

“The government is committed to reinstating the triple lockdown next year, but given its enormous cost to the public purse, it is possible that under difficult economic circumstances it will be suspended again. What we need is a longer term vision for the state pension and how it can work on a sustainable basis, ”said Helen Morrissey, Senior Pensions Analyst, Hargreaves Lansdown.

Read more: 11 tips on how to tick off your to-do list before Christmas

5. The British will always pay dearly for social care.

In September, the government announced its social protection plan. The proposals cap the amount someone pays for personal care at £ 86,000 and also raise the floor at which people get help paying for care from £ 23,250 to £ 100,000 in assets from 2023 .

The cap helps provide a bit more certainty, but it only covers personal care and people still have to cover significant costs for accommodation and bills.

6. It will be a quieter year for the property.

“After the record highs of 2021, we expect the housing market to collapse,” Coles said.

No new stamp duty holidays, lower levels of agreed mortgages and fewer properties on the books of realtors are likely to drive down sales figures.

Read more: UK mortgages hit record £ 316bn for 2021

When it comes to house prices, a lot will depend on how inflation and interest rates evolve. But unless there are unexpected serious shocks, there is likely to be a slowdown in price increases.

7. Britons will end up borrowing more on cards and loans

“It could be pretty much taken as a prediction for years and then the pandemic turned everything upside down,” Coles said.

In October, spending on credit cards was still down 3.2% year on year and other loans were down 0.5%. However, since the economy started to open again in April this year, the British have again spent more than they pay back.

Assuming the UK doesn’t announce another lockdown to deal with the new Omicron variant, Coles expects consumer credit growth to pick up.

8. You will be offered an orientation meeting when you come to collect your retirement income.

From June 2022, people accessing their retirement income for the first time will be offered an appointment with the Pension Wise guidance service.

These 45-minute sessions will introduce them to the different options available and should help them make more informed retirement decisions.

“It’s a huge benefit, but currently providers only offer the appointment when the client chooses a retirement income product,” Morrissey said.

“Ideally, we would like these appointments to be offered earlier in the process while the client is still exploring their options. “

9. You might get an unexpected bill out of the blue, and chances are you’ll have a hard time paying it.

In research by Hargreaves Landsdown just before the pandemic, 44% of people said they had faced an unexpected bill in the previous 12 months, costing an average of £ 1,269 – and the intervening period has brought even more uncertainty than ever.

ONS figures from November this year revealed that 27% of people were unable to pay an unexpected £ 850 bill out of the blue.

“This is why we should all be working toward an emergency cash savings safety net of 3 to 6 months of spending in our working lives,” Coles said.

10. New banks and building societies will offer the best savings rates, but most people won’t use them.

The best way to combat the impact of inflation on your emergency savings is to put your money in new online banks or mortgage lenders offering competitive rates.

According to a survey commissioned by Hargreaves Landsdown in September, only 11% of people choose to do so – while 40% stick with the giant of the streets they hold their checking account with.

Watch: What is a credit score and why is it important?


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