Inflation, mortgages, National Insurance: reasons to be cheerful about 2024

There are reasons to be optimistic about the prospects for our money in the year ahead.

2023 has been another bruising year for our finances.

But thankfully there are signs that the year to come will be a more positive one for various areas of our money.

Let’s take a look at some of the financial reasons to be cheerful about 2024.

Inflation is heading in the right direction

Perhaps the biggest issue for all of our finances over the last couple of years has been the rate of inflation.

It’s been persistently high, driving up the prices that we pay for all sorts of household goods, as well as contributing to the higher Base Rate and therefore more costly rate of borrowing.

The good news is that it appears to have peaked, and is steadily dropping now.

Back in January 2023 the consumer price index measurement of inflation stood at 10.1%, a staggeringly high rate (though itself down from the peak of 11.1% in October 2022.

However, it now stands at 3.9%.

It’s important not to get carried away here.

Even a rate of 3.9% is almost double the 2% target for inflation that the Bank of England employs, while in some respects the damage is already done ‒ according to the Office for National Statistics, the cost of food today is 30% higher than two years ago.

After all, falling inflation simply means that prices are rising more slowly, not that prices are dropping. 

Getting a better return on your savings

One of the overlooked downsides of high inflation has been the impact on our savings.

While headline savings rates have been at higher levels than we have become accustomed to in recent years, any interest earned has been wiped out by inflation.

If you don’t have a savings rate above the rate of inflation, then even if your savings balance is growing, you are losing money in real terms since that money can’t buy as much.

Thankfully as inflation has dropped, savers have had more accounts available to choose from that actually delivers an inflation-beating return.

While the top savings rates are roughly 1% higher than a year ago, it's worth pointing out that rates do seem to be on the decline. 

So if you do have money you want to set aside, it might be worth doing so sooner rather than later. 

Reduced National Insurance

The headline announcement in the recent Autumn Statement was the decision to trim the National Insurance we pay, both for employed workers and for the self-employed.

It’s a move that should see millions of people get to keep hundreds of pounds a year more from their earnings.

The fact that the National Insurance cut for employed workers kicks in from January means that even when the year is at its bleakest, millions of people will (potentially) feel a bit better off.

A general election could mean more giveaways

That National Insurance cut was clearly motivated by the fact that we have a general election on the horizon in 2024, and that upcoming vote could have immediate implications for our money.

For example, chances are there will be a Budget before the vote which will likely include some other giveaway from the Government in a bid to secure our support, while the Labour Party will also want to present some form of financial incentive to vote for them.

It may not be what’s strictly necessary for the long-term health of the economy, but that’s beside the point in an election year.

Mortgages will get cheaper

It’s been a grim year and a bit for those looking to take out a mortgage. The rapid increase in interest rates that followed the disaster of Kwasi Kwarteng’s mini-Budget has had an enormous impact on mortgage borrowers, with rates rocketing sharply. 

For those who were considering a purchase, many put their plans on hold, but for those who needed to refinance as their fixed term came to an end there was little option but to sign up to a new deal costing hundreds of pounds more each and every month.

However, the expectation that Base Rate increases have now peaked, and that if anything Base Rate will be cut next year, is already feeding through into mortgage pricing. Those deals are only likely to get cheaper from here, as lenders continue to compete for our business.

You’ll still face a rate much higher than was the norm just a few years ago, but it will still likely be an improved option than the rates on offer throughout 2023.

Water bills could be worse

April is always a brutal month, since that’s when so many hikes to our household bills take place, including on water bills.

However, millions of us are in line for a better-than-expected deal this year.

A host of water suppliers have been found by Ofwat, the industry regulator, to have failed to meet targets on pollution and leakages, with the result that they have been ordered to hand back millions of pounds to customers in the form of reduced bills.

As a result, while your bill may go up in April, it could be that it would have increased by more if the regulator hadn’t stepped in.

An end to mid-contract price rises

One of the other financial hits which take place at the start of the new financial year are the increases to our mobile and broadband bills.

That’s because many providers have it written into our contracts that they can hike our bills each year by inflation plus a certain percentage.

In recent years, courtesy of the high rate of inflation, that has meant massive annual hikes.

It’s ridiculous that they can get away with this, as we have highlighted repeatedly on loveMONEY, and thankfully the regulator Ofcom agrees. That’s why it’s looking at banning the practice next year.

Cheaper energy & the return of switching

The fixed energy tariff has largely disappeared over the last few years, courtesy of the chaos in the energy markets.

It has meant that virtually all of us have ended up on tariffs protected by the energy price cap.

Thankfully there has been enough stability of late that a handful of suppliers have felt able to start launching these tariffs once again, providing a little more certainty over what our energy bills will be each month.

While they tend to be limited to existing customers only, there is cause for optimism that these tariffs will become more commonplace next year.

But if you are interested in the security of a fixed deal, it's important you do your sums to ensure it's right for you. 

That's because analysts are pencilling in a 14% cut to our bills in April 2024. The last thing you want is to see everyone else's bills fall except your own!