2012 Stock Market Forecast
November 21, 2011 by staff
With volatile stock markets causing uncertainty but also a chance to buy when prices dip, this is hard to disagree with.
Chinese horoscopes also say it 2012 will be a year of mixed fortunes something confirmed by these forecasts:
Savills has halved its forecasts for house price growth over the next five years to just 6 per cent in the mainstream market. However in real terms that equates to an 11 per cent loss with inflation eroding the value of housing.
However, there is good news for those investing in – or considering buying – buy-to-let properties. Savills forecasts that private renting will account for one in five households by 2016 and as supply is unlikely to keep pace with demand, competition among renters will drive rents up by 20.5 per cent by the end of 2016.
2012 also sees further reform in pensions – but not of the gold-plated variety. Employees who are not currently enrolled in a work place pension will automatically start to be enrolled in a scheme from October 2012.
While this means they will be providing for their retirement, to secure a decent pension they will need to pay in additional contributions. When auto-enrolment starts they will need to pay just 1 per cent of earnings between £5,035 and £33,540 with the employer contributing a further 1 per cent, although this will rise to a minimum total contribution of 8 per cent by October 2017.
There are also exceptions to the scheme. It only applies to those aged between 22 and state pension age and earning over £7,475.
Also only larger employers will be legally obliged to offer auto-enrolment from October 2012 and as many as three million employees will opt out.
With public sector workers also facing increased contributions to their pensions, a third of workers putting their pension pots on hold and fewer than three in 10 under 35s having a pension, 2012 is likely to be a critical year for retirement planning.
While UK households remain in the red, historically low interest rates of 0.5 per cent present an opportunity to reduce borrowing – while it is cheap.
With forecasters not predicting a base rate rise until 2013 or even 2014, low mortgage rates in particular offer borrowers a chance to increase their monthly repayments to clear their debts more quickly.
However, the Office for Budget Responsibility (OBR) is forecasting that total household debt including mortgages will rise from £1.6 trillion in 2011 to 2.1 trillion in 2015, which means that the average Briton will then have debt equivalent to 175 per cent of their annual disposable income.
Only six savings accounts are providing a real return according to a recent report from financial research company Defaqto.
David Black, Defaqto’s Insight Analyst for Banking, says: “Savers continue to be hit by the dual effects of high inflation and the historically low-base rate.
“To get the best available returns, savers need to review their savings on a regular basis. In particular, people should look to use their ISA allowance, and take advantage of introductory bonuses and guaranteed minimum rates on savings accounts. Savers might also look at fixed rate bonds as a way of giving them a higher return over the longer-term, although they would need to be prepared to tie their money up for a fixed period.
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