Kevin Mountford, head of banking at price comparison websiteÂ moneysupermarket.com, gives his personal finance predictions for 2010.
The Bank of England base rate has been at 0.50% since March 2009, and it is not expected to change for the foreseeable future. The next move will be upwards, itâ€™s just a question of when that will happen. I donâ€™t expect any change in the first six months of the year and we may see a quarter, or possibly a half-point rise in the second half.
In April, everyone will benefit from the new ISA allowance, meaning they can invest as much as Â£10,200 a year, up to Â£5,100 of which can be saved in a cash ISA, the returns on which are tax-free.
Anyone who is over 50, or 50 before 6 April 2010, can already take advantage of the new higher ISA allowance, but the extension of the rules to all adults means there will be big interest in cash ISAs.
The increase in the annual allowance (it is currently Â£7,200 a year for those under 50) is obviously welcome news, but I think the government still needs to do more to incentivise saving.
Competition in the savings market wonâ€™t be restricted only to cash ISAs, although thatâ€™s where the activity will be centred from March to May to tie in with the start of the new tax year in April.
As we saw in 2009, banks and building societies are still desperate for our cash because of the ongoing shortage of funds for loans and mortgages stemming from the credit crunch. But with interest rates so low, many people see little point in saving at the moment which means providers are having to offer rates well above the base rate as they try to attract new customers.
Expect the battle for saversâ€™ money to resume in January. I think weâ€™ll see some really competitive fixed bonds to be launched early in the year.
I think that in 2010 customers will start looking for the best current account for their particular needs rather than being seduced by the one with the best rates.
People really need to think about how they use their current account and what features are most important to them, whether itâ€™s a low-cost overdraft or good returns on their money.
Following the bank charges ruling, I think weâ€™ll see some real innovation among current accounts, but banks, government and regulators need to make sure we create a healthy and competitive market.
Life for borrowers will continue to be tough in 2010.
The cost of credit is going up and lenders remain cautious about who they will lend to. The leading rates are only available to those with excellent credit histories and an increasing number of banks and building societies are only offering personal loans to existing customers. I think thatâ€™s likely to remain the case for at least the first six months.
Unemployment is still high and thereâ€™s been an increase in the number of people failing to meet their loan repayments. I think this will continue to rise during the first half of 2010, until the economy is firmly back on its feet.
2010 looks as though itâ€™s going to be a really interesting year for credit cards. Providers face a number of different challenges, including bad debts and proposed regulatory changes.
Because of that, Iâ€™m expecting to see an overall drop in the number of credit cards on offer. It will become even harder for anyone with a less-than-perfect credit score to get hold of one of the leading credit cards and I think thereâ€™ll be fewer 0% deals available generally.
Thanks for your time and thoughts Kevin!
photo credit: vestman
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