Money Insider: Stay buckled up as roller coaster ride isn't over yet


As we approach the Christmas holidays, it's a chance to relax and unwind with friends and family. For many people it will be a temporary but welcome respite from what has been a very difficult year, often having to cut back in order to balance the household finances.

Whether you're an individual, run a small business or are part of a FTSE listed company, from a financial perspective 2011 has, in the main, been a year to forget.

Almost four years on from the banking crisis, the UK population is now paying the price for a decade-long credit binge that started in the early nineties.

In a year where unemployment hit a 17-year-high with 2.6 million now out of work, where inflation has been running at two and a half times the official target and fuel, food and energy costs have soared, it's no wonder people have cut back on spending, resulting in some high-profile retailers going to the wall.

On the personal finance front it's been something of a mixed bag, with borrowers enjoying some ultra-low rates at the expense of savers who have for the third year running struggled to find a decent return.

The double misery of high inflation on top of a low interest rate strategy from the Bank of England's monetary policy committee has meant for much of the last year it has been impossible for customers to find a savings account paying a rate high enough to protect the spending power of their nest egg.

Increasing concerns regarding inflation led to a number of providers launching index-linked savings products, and while these may have looked attractive during the latter part of this year, there are concerns that a sharp fall in the cost of living next year will soon take some of the shine off.

Although base rate remained stuck at 0.5 per cent all year, a renewed appetite for retail savings balances means that some rates have ended the year slightly higher. With fixed-rate savings bonds there has been little change in rates for the longer terms of four and five years, with the best returns currently 4.3 per cent from Halifax and 4.7 per cent from krbs respectively.

For shorter-term, fixed-rate deals the news has been more positive, with one-year rates increasing from 3.25 per cent to 3.6 per cent and the two-year best-buy from 3.65 per cent to 4 per cent.

On 1 November, the Junior ISA (JISA) was introduced, giving an annual £3,600 tax-free allowance to savers under 18 years of age.

The JISA replaced the Child Trust Fund (CTF), and although the tax-free allowance was trebled from £1,200 to £3,600, the earlier decision by the Coalition Government to scrap the free £250 voucher scheme was seen as a short-sighted move.

With families facing their toughest financial challenges for years, there are many parents who would love to set money aside for their youngsters but wouldn't even scratch the surface of a £3,600 allowance, and without any incentive on offer are unlikely to sign up for a JISA.

On a more positive note, if you had 20 per cent or more equity in your home and a good credit record, you'll have been able to choose from the lowest mortgage rates available in more than 20 years. Lenders were falling over themselves to maintain their share of business in a subdued mortgage market which led to some excellent deals.

It was a similar situation in the personal loans market where a battle between Sainsbury's Finance and Nationwide Building Society pushed down the cost of unsecured borrowing, with the latter at one stage offering loans of £7,500 at 6.1 per cent APR, its lowest-ever rate.

The battle for current accounts reached a new level during 2011 too, with Santander offering up to £300 and The Co-operative bank £200 as cash incentives to those prepared to switch.

For the banking industry as a whole, it's been an awful year when it comes to negative publicity, payouts and fines.

In May, the British Bankers' Association decided not to appeal against the High Court's payment protection Insurance (PPI) judgment.

The financial implication to the banks was staggering, with Santander setting aside £731m, Barclays £1bn and Lloyds TSB £3.2bn to meet PPI claims.

The Financial Services Authority also came down hard on the banks, handing out fines of £10.5m to HSBC, £7.7m to Barclays, £6.3m to Coutts and £3.5m to Bank of Scotland during 2011.

With the Government's relentless austerity drive set to cause more misery on the jobs front and the uncertainty surrounding the eurozone crisis giving increasing cause for concern, it's already clear that families need to stay "buckled up" as the bumpy ride on the economic roller coaster is far from over.

Andrew Hagger –

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
food + drink
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
Life and Style
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    COO / Chief Operating Officer

    £80 - 100k + Bonus: Guru Careers: A COO / Chief Operating Officer is needed to...

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    Day In a Page

    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments