Expert predictions for house prices, inflation & more in 2017

We asked the experts what's in store for our money in 2017. From house prices to savings rates, here's what to expect...

2016 has been a tumultuous year and you’re probably wondering what’s going to affect your money over the next 12 months.

What will Brexit mean for your house price? How will it affect your investments?

Will you end up paying far more for groceries? What might the Government do to correct the economy or balance the housing market and how might it affect you?

What is going to happen to the pound? Are we all going to financial hell in a consumer credit handbasket?

Well, we just don’t know. If 2016 taught us anything it’s that what we expect or assume will happen can erupt overnight and leave the markets and experts bristling with uncertainty.

However, there’s still value in hearing what the most informed people believe is likely and so we lined up a few and asked for their predictions for 2017 and what it has in store for our personal finances.

Here’s what they had to say.

‘Bad news for renters’

The Association of Residential Letting Agents (ARLA) predicts that the number of new rental properties becoming available will fall next year thanks to the extra stamp duty burden for landlords, with 37% of their agents predicting that supply will fall.

David Cox, managing director of ARLA, says: “The Government continues to lash out against the private rented sector to cover its own failure to build the number of homes this country needs.

“Such policies will have a detrimental effect on the very people the Government aims to help the most.

“As a result, we predict 2017 will be a raw year for renters. We now need stabilisation from the Government before tenants are squeezed dry of every penny.”

Not everyone is predicting a landlord exodus, though. Rob Bence, co-founder of the global investor community The Property Hub, suggests buy-to-let landlords will simply move north.

“What we will see in 2017 however is a shift in location focus. Manchester has been threatening to take the limelight from the London property market during 2016, and in 2017 we will finally see this happening.

“Manchester will be grabbing all the headlines property-wise for 2017, and rightly so, with so much investment going into the city and its capital growth upside potential.”

‘Savers will suffer’

For several years now savers have suffered from low interest rates but now online investment service Wealthify predicts that a “toxic” combination of record low rates and rising inflation could wipe out around £6 billion a year from the value of the country’s cash savings.

With inflation reaching 1.2% in December and average cash saving rates rarely exceeding 0.25%, savings are effectively shrinking by 1% a year.

Richard Theo, CEO of Wealthify said: “Britons are going to be billions of pounds poorer. £6 billion is a staggering amount of money to vanish from savings accounts each year and should serve as a stark warning to the millions of savers resigned to ‘put up’ with low returns.”

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‘Insurance premiums will rise’

In the latest Autumn Statement, the chancellor Philip Hammond announced that he will hike Insurance Premium Tax in 2017, which will be the third hike in just over a year. A number of commentators have warned that this will start to hurt policyholders.

Jason Berry, director of sales at general insurance provider Uinsure, says: “The latest increase will come into play in July and will see IPT rise from 10% to 12% - double what it was in 2015 when the first hike came into effect.

"There is no doubt this increase will be passed onto consumers. Policy premiums will have to rise.

“There is already a huge protection gap at present, with far too many people sidestepping insurance product to save cash. Rising premium prices could add to that problem.”

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‘Pension scammers will get cleverer’

The new pension freedoms have resulted in a wave of criminality that has taken the life savings of far too many pensioners and shows no sign of abating. Frustratingly, some experts predict this may get worse in 2017, despite Government action to stop cold calling.

Lee Goggin, co-founder of the website FindaWealthManager.com, says: “Banning cold calls is a step in the right direction but those making the calls are unscrupulous and ingenious so will find more sophisticated means to approach people.

Cleverly composed and presented letters, texts and e-mails will replace cold calling. The pension-scam industry will prove very difficult to eradicate and I fear there will be just as many victims in 2017 as there were in 2016.”

Pension scams: how to stay safe 

‘More of the same for the housing market’

Homeowners may be relieved to hear that the National Association of Estate Agents (NAEA) isn’t predicting a housing market catastrophe next year but it says the property market is still feeling the effects of Brexit-related uncertainty.

Mark Hayward, managing director of the NAEA, says: “Next year, we expect it’ll be more of the same; there won’t be a ‘property Armageddon’, but things won’t get much better for first time buyers, and those looking to up or down-size.”

However, some market commentators are confidently predicting a positive housing market, despite the many uncertainties.

Stuart Law, chairman of Assetz Property, says: “I believe that we are looking at national growth of around 3% in 2017 for house prices.

“This will be driven by healthy growth in the towns and cities outside of the M25 where investors can get better long-term yields for a sensible price point and this will counter growing weakness in the London market.”

Paul Smee, director general of the Council of Mortgage Lenders, says: “The housing market is relatively well insulated from direct Brexit effects as most activity is driven domestically, but it is not immune from more generalised economic uncertainty.

“And we expect any modest strengthening in home-owner lending to be rather offset by a less active house purchase market in buy-to-let, as both tax and regulatory changes bite on landlords.”

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‘We’ll share more and buy less’

The sharing economy has exploded over recent years and this looks set to continue in 2017.

Richard Laughton, CEO of peer-to-peer car rental platform easyCar Club, says: “Our own research shows that over two thirds of the country (70%) used a sharing economy platform to make or save money in 2016, but we know there’s a lot of room for growth.

People are keen to embrace borrowing someone’s house, car or parking space, but aren’t necessarily aware that these individual services are part of a wider, emerging movement towards sharing.

“As awareness of the sharing economy itself grows in the New Year, I predict we’ll see many more people realise the financial rewards of even occasionally renting out their belongings to make some extra cash.”

‘Inflation will be higher’

November saw inflation reach a two-year high, reaching 1.2% up from 0.9% in October. Some analysts are starting to predict inflation will climb over the next 12 months.

David Coombs, manager of the Rathbone Multi-Asset Portfolios, predicts: “While runaway inflation is not our base case, we think that inflation will rise steadily in 2017.

“Sterling has fallen 10% against a basket of currencies since the referendum. And with negotiations over Brexit due to begin in the second quarter, the pound may well plumb greater depths (although we believe sterling is very undervalued on a long-term view).

“…Given that we’re bumping up against full employment and the Bank of England seems unwilling to raise rates, there’s a risk of inflation breaking higher. We could even see stagflation if growth stalls and prices balloon further.”

The Bank of England has predicted inflation will reach 2.7% next year.

‘There will be high consumer debt levels’

Credit card debt hit a record high in the autumn of2016, according to Bank of England figures, a boom that saw outstanding credit card debt alone climb by £571 million to £66.2 billion in one month alone.

Unsecured consumer credit grew by 10.5% in the 12 months to October, and Christmas spending has prompted many debt charities to warn that many Brits will face a challenging 2017.

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‘We’re not getting many pay rises’

Sadly, wages have been fairly stagnant in recent years and now the Institute for Fiscal Studies has warned that wage growth prospects for the future look “dreadful” and wages are on course to be lower in 2021 than they were in 2008, after adjusting for inflation.

That gloomy outlook is mirrored by British people themselves. New research from Equifax shows that 41% of British workers are not expecting a pay rise at all over the whole of 2017.

What’s more, over a third say they are very or fairly concerned about meeting their financial commitments during the next 12 months, with many expressing concern for the state of the economy.

What do you think will affect your money the most over the next year? Are you taking any steps to protect yourself against financial uncertainty? Share your thoughts and predictions with other readers using the comments below.

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