We all feel “beaten” by rising bills but the good news is coming

It’s hard to be happy with rail union boss Mick Lynch threatening to ruin a normal first Christmas in three years following the Covid lockdowns. But please, do not give in to despair.

There are some positive signs for the coming year. 2023 may not be quite as bad for your personal finances as 2022.

Hard to believe, as the cost-of-living crisis is forcing millions to choose between eating and keeping warm, despite all the costly government bailout packages.

However, there is a chance now that inflation has peaked, with last Wednesday’s figure showing it eased to 10.7 percent in November, down from 11.1 percent in October.

One month is not a trend, said Fouad Razakzadeh, a market analyst at City Index, but added, “Inflation in the US and the eurozone is also cooling.”

Pensioners have been pressured by the triple suspension of state pensions for this financial year, which gave them a wage increase of just 3.1 per cent as inflation soared into double digits.

Next year should be brighter as the triple lock is back and the state pension will rise by 10.1 percent from April.

If inflation falls to five per cent as the Bank of England expects, retirees could get a wage increase twice the rate of inflation today.

It may not make up for this year’s losses, but it is a positive step.

Mortgage costs have risen as the Bank of England raises interest rates to curb inflation, putting pressure on homeowners.

Rates touched 7 percent in the wake of former consultant Kwasi Kwarting’s micro budget, but are now slipping back toward 5 percent.

Estate agency Chestertons expects a slight drop in house prices in England and Wales next year of less than 1 per cent, followed by growth of 1.3 per cent through 2024, rising to 10 per cent in London.

“The number of forced sales will be relatively small, supply will be low and strong underlying demand will insulate the market from any dramatic declines,” said Head of Research Sebastien Ferretti.

Darius McDermott, managing director of independent fund research firm FundCalibre, said that with the stock, bond, gold and bitcoin markets plummeting in 2022, there was nowhere to hide for investors, but they shouldn’t despair.

“Today’s turbulent markets look relatively cheap and 2023 may be the year when things start to get better rather than worse.”

The rally brought some much-anticipated good news for savers in 2022, with the Bank of England raising its interest rate again last Thursday, to 3.5 percent.

Savers can now hold fixed-rate bonds that pay up to 4.5 percent annually, three or four times what they earned last year.

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That’s still about half the inflation rate and savings rates may not go much higher now, said Anna Bowes, founder of Savings Champion. “It could be worth taking advantage of last week’s rate hike to lock in a best-buy fixed-rate bond today.”

In further good news, the 22 million Britons who own Premium Bonds will enjoy an additional £80 million in prizes every month from January.

The National Savings and Investments (NS&I) raised the annual prize rate for funds to 3 per cent, from just 1 per cent in May, giving more savers that winning feeling.

Perhaps the biggest shift this year has been in premium rates. A year ago, a 65-year-old with a £100,000 pension could buy a one-off annuity paying up to £4,800 a year. Now they can get away with more than £7,000 a year, again, thanks to higher interest rates.

That’s an extra £2,200 each year for the rest of their lives, said Andrew Tully, technical director of Canada Life, worth £44,000 over a 20-year retirement. “Unfortunately, this won’t help current pensioners, but today’s retirees looking for a lifetime annuity are getting a much better deal.”

We still have a lot of concerns But there are some reasons to be positive. Hopefully, there will be more as 2023 progresses.

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