Our personal finance predictions for 2008

By MoneyhighStreet Staff. Published on December 24, 2007 This post currently has no comments.

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The second half of 2007 has been a rough ride for British consumers with the rising cost of credit and the slowdown in the housing market. However, there are signs that the worst of the credit crunch fallout has passed. We look at what 2008 may hold for you when it comes to your personal finances.

Loans

The latter half of 2007 has been a tough time for borrowers. Not only has the cost of credit spiked, lenders now have much tougher criteria when it comes to giving out loans than they did before. In fact, some lenders have even left the market in the last few months. The recent cut in interest rates by the Bank of England will ease the pressure on consumers, but getting new loans will not be easy.

The upshot for the consumer is that any sort of bad credit rating should be avoided. Make sure that bills are paid on time and that your credit rating is squeaky clean. There are signs that lenders may relax in the coming months but this is far from certain. If you are a homeowner you are at a distinct advantage if you want to borrow in 2008.

“This could be the year of the secured personal loan. The credit crunch undoubtedly means good value unsecured personal loans will be difficult to come by for a lot more people,” says Tim Moss of moneysupermarket.com.

Credit cards

We probably won't see much change with credit cards in the year ahead. We've said it a few times in recent articles, but we'll say it again: If you have a large credit card debt going into the New Year, take advantage of a 0% deal on a new card. Watch out for the hefty balance transfer fees though.

Unsecured loans could be tough to get in the coming months so there may be a temptation to use your credit card as a form of credit. If you are on a 0% deal this is okay. If not, try not to borrow too much as interest rates are extortionate.

Mortgages

As with all other forms of credit, in 2008 you are at a distinct advantage if you have a clean credit rating. The number of new mortgages fell dramatically in the last six months so lenders are keen for business. However, their lending criteria will be strict.

“Lenders will continue to keep a tight reign on risk, meaning competition for the 'best' customers will be fierce and there will be less choice for 'riskier' applicants. This will translate into higher fees and interest rates for the most vulnerable borrowers,” says Louise Cuming of moneysupermarket.com.

Louise also predicts that banks will continue to impose high fees and focus on keeping existing customers rather than attracting new ones. So if you have a mortgage, it might not be a bad time to pressure your lender for a better deal.

Insurance

The insurance outlook isn't great. The summer and winter floods have shaken the insurance market and home insurance is certainly on the up. The amount spent on motor insurance is also on the rise as more and more people turn to hybrid cars, which can attract high insurance premiums.

However, competition in the market will remain fiercely competitive so there will be deals to be found in all sectors.

“Thankfully the sheer number of providers and price comparison sites means consumers will still have the opportunity to save money,” comments Richard Mason of moneysupermarket.

While the outlook for the year ahead remains uncertain and lenders remain cautious, there are signs that things will improve. However, the less debt you have and the stronger your financial position the better, as credit could be hard to come by for some time yet.

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