10 reasons you need to cheer up

It's not all doom and gloom! There are 10 reasons to be cheerful, says Harvey Jones.

I picked a bad week to write an article claiming there’s more good financial news out there than you think. Stock markets are crashing, Italy and Spain are in turmoil, high street chains are closing, energy costs are soaring and a new report suggests house prices won’t recover for a decade. Yes, there is certainly plenty of bad news out there.

But it isn’t all doom and disaster. There is some good news. Honest. And you need to know what it is, if only to avoid being swamped by negativity.

So here are 10 reasons to be cheerful.

1. Cheapest ever mortgages.

Mortgage rates have hit an all-time low, Moneyfacts recently proclaimed. Actually, “all-time” means since 1988, when it started collecting the data. This still makes them the cheapest in 23 years. The average five-year fixed rate is 5.29%, and the average two-year tracker is 3.37%. Some lenders offer much cheaper deals. True, you need a squeaky clean record and either a big deposit or plenty of spare equity to qualify, but lenders are gradually offering better deals at higher loan-to-values. Not everything is getting more expensive. Compare mortgages to see if you can get a cheaper deal.

2. Inflation has dipped.

Inflation dipped to 4.2% in June, down from 4.5% in May, according to the consumer price index. That’s still more than twice the Bank of England’s target, and may rebound in the next few months (thanks, British Gas!), but many analysts believe it will fall sharply next year, when January’s VAT hike and commodity price rises stop affecting the figures. This is good news for homeowners, because it makes an interest rate hike in 2011 even less likely. Or 2012, for that matter. And it’s not just good news for borrowers…

3. Hope for savers!

Falling inflation is good news for savers, because it slows the rate at which rising prices erode the value of their cash (the downside is that it makes an interest rate hike less likely). Another piece of good news is that you can earn 50 times as much interest on your savings as you’re getting now. Better still, you can even earn 6% a year on safe investments.

4. High street sales bonanza.

A price war on the high street is the main reason inflation fell in June, as retailers started their summer clearance sales early. Games, toys, hobbies, digital cameras, DVDs, televisions, mobile phones and second-hand cars are all falling in price, and there’s more to come. With high street retailers desperate for cash and offering 60% to 80% discounts, the disinflationary trend is to continue in July, says Fidelity fund manager Trevor Greetham.

5. China isn’t as stupid as us.

During the boom, we let our property bubble run out of control. The commie capitalists have learned from our mistakes, aggressively hiking interest rates to stop their economy from overheating. It will be close, but they might just engineer a soft landing. That would be good news for us, because if the world’s second-biggest economy (China) went the same way as the world’s biggest (the US), you could wave goodbye to the tentative recovery.

6. Companies are still making money.

Share prices may be faltering, but you can blame that on the euro. Corporate earnings are in rude health. Many big UK companies are sitting on a mountain of cash, and at some point they have to start spending this money. That should be good news for the global economy.

7. Cheaper homes.

House prices won’t recover from their 2007 peak until 2020, according to Pricewaterhousecoopers. Another piece of good news, if you ask me. House prices were cruelly expensive before the credit crunch, as every first-time buyer knows. A stagnant market has two big advantages. First, it will help rebalance prices, as inflation quietly drags down the real cost of property. And second, it means the market isn’t crashing. Who knows, we might get that soft landing after all.

8. Britons are clearing their debts.

We’re paying off our personal debts at a record rate - more than £12 billion last year. Yes, we still owe around £1.4 trillion, but at least we’re heading in the right direction. Spend, spend, spend is out. So is save, save, save, thanks to rotten rates on cash. Instead, it’s repay, repay, repay. This may be driven by fear, but the change in attitude is to be welcomed.

9. You’re getting more for your money.

Stop grumbling, your spending power has actually grown over the past three months. It isn’t me saying this (don’t shoot!), but Lloyds TSB. Its latest Spending Power Report claims discretionary spending power, the income you have left after spending money on essentials, was 0.4% higher at the end of June than a year ago. Even if you don’t feel richer, Lloyds TSB says you are.

10. We’re not Greece.

Things could be worse. We could be in the eurozone, standing in line behind Ireland, Greece, Portugal, Italy and Spain, waiting for financial Armageddon to strike. Instead, we’re in charge of our own currency. That means the Bank of England is free to slash interest rates, stoke inflation and debase the pound, and it doesn’t have to ask permission from Germany.

There is still plenty of bad news out there, on prices, jobs, debt, and all the rest. But as you can see, there are also a few patches of good news. Let’s hope they spread.

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