With growing concerns about job security and predictions of minimal movement in house prices, the next 12 months are likely to bring little change in the present low levels of mortgage activity.
A low base rate and associated affordability will keep the market ticking over, while the Government's recently announced housing strategy should drive more first-time buyer business.
There is likely to be a spike in demand for affordable housing in the spring, with buyers keen to complete on properties before the stamp duty holiday expires at the end of March.
Currently, lenders are bearing with many borrowers who are in arrears and trying to nurse them through these difficult times. However, if we see a deterioration in the UK and European economies leading to increased levels of unemployment, the number of forced sales will rise and could force house prices lower.
While this would initially lead to more cases of negative equity, in the long term it is vital that the ratio of property prices to earnings is reduced if we are to return to vibrant mortgage and housing markets.
The Financial Services Authority's Mortgage Market Review will have little direct impact next year, but following a period of consultation, it is hoped that rules will be agreed in the summer of 2012 and implemented during 2013.
With residential sales slow, there is likely to be an increased focus from lenders on the buy-to-let market as landlords seek to cash in on sky-high rents.
The biggest problem for mortgage borrowers and the wider economy will come when interest rates start to rise, as the money they've saved on lower repayments has been swallowed up by increases in fuel, energy and food costs.
Most economists agree that rates will remain low until 2013 or 2014, so fingers crossed they're right and that time bomb will keep on ticking next year.
It's been another bleak year for savers, and as we approach the third anniversary of base rate hitting a record low of 0.5 per cent, the outlook for the next 12 months doesn't look much brighter.
It's not all doom and gloom though, as the impact of the eurozone crisis, lower inflation and competition from new banks could bring some respite for the beleaguered saver in 2012.
Rates have improved slightly during the last 12 months, initially on short-term, fixed-rate savings bonds, but more recently rates on instant access accounts have improved too. The reason for the latter is down to the crisis in Europe which has led to the rate banks charge each other for borrowing (Libor) to rise sharply.
The banks are concerned how much exposure their rivals may have to countries such as Greece and Italy, and the additional perceived risk is reflected in these higher Libor costs. This has seen some providers move away from the interbank market as a way of raising funds and turn their attention to retail deposits by offering some improved savings deals instead.
At the start of 2011 it was difficult to get 3 per cent for a one-year, fixed-rate bond, whereas now you can get 3.6 per cent. The same can be said for instant-access accounts, where it's now possible to get 3.2 per cent, almost half a per cent more than you would have got last January.
It's not just low rates that have caused financial misery for savers; the situation has been exacerbated by the high level of inflation, which has further eroded the spending power of people's cash.
The CPI measure of inflation soared to 5.2 per cent last September before starting to tail off. Experts, including the Bank of England, are predicting that the rate will be nearer 3 per cent come the spring.
There will also be some changes in the make-up of the banks on our high street this year, with Virgin Money taking over Northern Rock from 1 January and the Co-operative set to buy 632 branches from Lloyds TSB.
It's vital for all customers that we see some fresh blood in the sector, giving the established banks some much-needed extra competition, which will hopefully see the public getting some better deals as a result.
Another positive for 2012 is that the tax-free savings allowance rises from April, with the overall ISA limit increasing to £11,280, of which £5,640 can be held in cash, £300 up on the cash limit for 2011.
My final tip this year is not to give up on the savings habit just because rates are low. If you can keep adding to your capital each month, you'll be in a better position to reap the benefits with a larger balance when interest rates eventually pick up again.
Andrew Hagger – Moneynet.co.uk
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