What’s ahead for 2018
Our profit prophet Bill Tyson looks into his crystal ball and, based on his expert predictions, has some sage new-year advice
For most people, it seems, it’s just the bad bits of the madness that drove us to go bust as a nation. Traffic is getting snarled up on the M50, buyers are fighting over scarce houses and banks are getting mighty cheeky again. But there’s good news too. Next year, we’ll see unemployment fall to just 5.4% – which is defined as full employment
Wage rises are also starting to come through with 2.5% extra in your pay packet predicted for next year.
Here are some other forecasts – and what you should do about them:
MORTGAGES
European Central Bank interest rates are not expected to rise next year.
‘Unless there is a big rise in inflation, then interest rates are going to remain low, and certainly lower than what we’ve seen historically,’ says economist Alan McQuaid of Merrion Capital.
‘Even when rates rise, starting in mid to late 2019, I think they will only go up by 1% to 1.5% at most, with the risks tilted more to the downside of this range than the upside.”
So there’s no need to panic. In fact, mortgage rates could come down further in 2018.
Our mortgages were just under 3.4% on average in 2017. That’s nearly twice the eurozone average of 1.8%.
In September, AIB cut rates as low as 2.95% for variable mortgages.
Other lenders have yet to follow suit and may yet do so in 2018 as there is at least some (though not enough) competitive pressure in the market.
With rates set to rise from 2019, also worth a look is Bank of Ireland’s 3% 3-year fixed rate, especially when its cash-back offer is added into the mix.
WHAT TO DO
Even if there are no mortgage rate cuts in 2018, make some by getting a better deal. Your interest rate should already fall in line with your LTV ratio as property prices rise and you pay off your loan. But if not – make it happen! Mortgage rates are easily compared on websites such as www.bonkers.ie and www.ccpc. ie. Even a half per cent cut would save €8k on a €200,000 mortgage over 25 years.
TAX
Looking into my crystal ball, I see tax cut expectations played down by the Government. But lo and behold, they are handed out with a great fanfare in Budget 2019.
However, on further analysis after the hullabaloo dies down, we will realise we were conned as tax bands and credits were not indexlinked so we ended up no better off. No, I’m not psychic, that’s just what happens every year! The playing down of expectations has already started.
WHAT TO DO
Make your own tax cuts by claiming what you are due. Nearly two-thirds of taxpayers miss out by not claiming home carer’s credit – for those working in the home – which will be worth €1,200 in 2018!
If you’re on PAYE, use the Medical form MED1 to claim tax relief on medical expenses
(including dental work). You don’t have to send in receipts – just keep them for six years in case you’re asked to produce them.
You can claim for expenses going back up to four years. Also make sure you are getting the flat-rate expenses that Revenue allows each profession to claim. See www.revenue.ie.
HOUSEHOLD BILLS
We were hit by a plethora of household bill increases at the end of 2017.
But if you haven’t switched your energy, broadband or phone plan for a couple of years, you can save hundreds by doing so now. There’s also likely to be a bit of a price war in January to attract consumers trying to make savings in the new year.
WHAT TO DO
Check out the best deals on energy and TV/ phone/broadband packages with www.bonkers.ie or www. switcher.ie.
You can save up to €335 on energy costs and €432 on some broadband/TV/phone packages, according to Switcher.ie.
PENSIONS
Most private sector workers don’t have a private pension and face retirement living on State pension income that’s not much more than the dole.
Compulsory auto-enrolment is where workers and employers both must pay into a pension – and it is on the way.
The UK brought it in five years ago with employers and employees contributing a minimal 1% of their income each.
That’s due to be stepped up to 3% and 8% respectively by 2019.
Most Irish workers are in favour of a similar scheme. Taoiseach Leo Varadkar sees the first payments going through in 2021. So we should hear more about this in 2018.
WHAT TO DO
Start a pension if you need one. But hold back on investing too much in shares until the stock market sorts itself out with either a correction or further clarity on whether current valuations are justified. Use spare cash to pay down debt and your mortgage.
SAVINGS
Things went from bad to worse in 2017 as banks pulled off the oldest trick in the book. The banks with half decent deposit rates slashed them to a pittance when they had enough savers onboard (yes, KBC, I’m talking about you!).
WHAT TO DO
If you need to stash money away short term, KBC’s 0.3% is the best rate on demand despite falling sharply. An Post’s 0.98%-a-year tax free saving certs are best over five years. But start thinking about alternatives to deposit accounts.
SHARES
Shares hit new peaks at the end of 2017. How long this will go on is anyone’s guess. There is an argument that current share valuations are justified because interest rates are so low and money has nowhere else to go. But even if they are, watch out for a correction of some kind in 2018. That’s not the end of the world for investors, it’ll just mean a paring back of some of their huge gains.
WHAT TO DO
A very tough call. If you’re already in the market, stay invested but think about moving to safer options. If you’re not in, it’s a dicey time to enter but you could miss out on more gains if you don’t. Maybe look at drip-feeding regular small sums into a low-risk investment fund.