A shrinking economy and the continuing effects of an interest rate squeeze could make 2025 a tricky year for consumers and businesses alike.
Mark Bogard, Chief Executive of the Family Building Society, believes that the slowing of the economy could unfortunately accelerate further as the New Year gets underway as the full effects of October’s Budget have yet to be felt and it will not be helped by more homeowners still coming to the end of their 5-year fixed mortgages.
Bogard reckons that the real squeeze of increased interest rates on consumers has happened much slower than in previous cycles because so many people have 5-year fixed mortgages.
He says: “It is certainly happening now for many, with more to come in 2025. After the Bank of England held rates at 4.75% on 19th December the market is now expecting rates to go down only twice by 0.25% in 2025 to 4.25%.”
COULD GO LOWER

He adds: “However, they could go lower, just look at what’s happening in the Eurozone where both France and Germany are hurting and rates are falling.
“This would, of course, be bad news for savers, who’ve had the first period since 1948 when savings rates have been higher than inflation – so they’ve had a real return on their money”.
ECONOMIC DRIVER

Housing was to be one of Labour’s big economic growth drivers but Bogard says Angela Rayner’s planning proposals will certainly not solve the housing crisis as the annual new build target only represents one per cent of the existing housing stock.
“She needs to concentrate on the other 99% and also focus more on brownfield development rather than greenfield which will be easier to get done and generate less objections. If I were her, I’d ban greenfield development for 10 years.
“Giving downsizers a stamp duty holiday would also help get older people out of under occupied family homes thus effectively increasing housing supply.

“Politics can change quickly but if the Great British public keep forming the same view about the new Government across 2025 as they seem to have been in its first six months, firming up on what they think about the Labour brand, it may then be very hard for them to change voters’ minds and that might mean that the real winner is Nigel Farage”.