There is nothing more permanent than change and with the arrival of a new year, a new set of challenges also arrives. In 2018, this will also be true. Families will face new challenges and new opportunities too!
Following are a few trends to watch out for…and plan for:
1. Diesel car owners will feel the pinch – across the EU, Governments are increasingly concerned with the impact surging diesel car sales are having on urban air quality. In cities such as Paris and London, city planners are moving to restrict diesel cars in a drive to reduce harmful emissions. For diesel car owners, the shifting focus of authorities away from diesel-powered cars will mean less incentives and more penalties, decreasing the demand for diesel engines. And for existing diesel car owners, higher restrictions and depressed demand for diesel cars will likely result in a drop in the value of their diesel engine cars. While cars always lose value, the diesel dilemma puts this in a whole new dimension.
2. Your investment adviser will have to work harder…which is good news for you! EU authorities are determined to make the investments markets more transparent for investors. Since January 3rd, they have launched MIFID II which is a behemoth of regulatory framework that impacts not just EU investment trading but trading on a global scale. To date, the investment landscape has been described by EU authorities as too ‘opaque’ which it suspects fuels an unnecessary rise in the overall cost of investing to the ultimate investor. From 2018 on, investment traders will be required to provide much more in the way of disclosures to consumers in how they attain research and get remunerated. For Irish investors, while this could translate to a rise in upfront advisory fees, over the long-term, it should translate to higher rates of investment growth (and a faster rate of growth in their investments and retirement account values).
3. Your relationship with money will matter even more – this is the year the Central Credit Register (CCR) begins to finally take over the role of ‘credit police’ from the Irish Credit Bureau. So, while the optics of a new guardian of consumers personal credit information may have the appearance of a new gate-keeper, it is the back-room power of the new organisation that will make a world of difference. For example, while the CCR is ‘owned’ by the Irish Central Bank, it is managed by the Pan-European Crif. And Crif are one the world’s leading managers of credit data. But they don’t just manage consumer credit data, they interrogate and manipulate it using a complex algorithm which produce personal credit ‘scores’. It is the credit scoring system (similar to FICO in the US) that has the power to transform how others can quickly and easily analyse our personal relationship with money.
4. Mortgage rates will become a focus at the European Central Bank – for Irish mortgage holders, especially those with low-margin tracker mortgages, July 2008 was a watershed. This was when the ECB increased the base-rate of interest to 4.25%. But shortly thereafter, with the arrival of the ‘credit-crunch’ and start of the global recession, they have fallen ever since (except for a rise blip in 2011). Since March 2015 and the start of Quantitative Easing (the purchase of assets by the ECB), interest rates have been at zero (0). For tracker mortgage holders with a margin of ECB + 1%, their effective rates of interest is currently 1% also. But with the Eurozone economy in full recovery and the Euro gaining in strength against major currencies, there is growing expectation that European Central Bank will end QE, which is the first step to returning mortgage interest rates to a more ‘natural’ level. And this ‘natural’ level will mean only one thing for Irish mortgage holders; a rise in monthly mortgage repayments.
5. The money in your wallet will be unwelcome – the rise in cashless payments at an increasing number of merchants makes it easier to pay for a wide number of goods and services; coffee, groceries and even road tolls. But internationally, more and more merchants are abandoning cash entirely as ‘cashless card’ providers move to subvert cash entirely. In the US, reports of local bakeries and coffee outlets being rewarded (US$10,000 and more!) to go entirely cashless for all sales transactions means that cash is officially ‘unwelcome’ at a growing number of retailers. And this shift is unique as it now means that since the foundation of modern states and the rise in ‘fiat’ money, private industry is pushing to replace the foundations of the monetary system that underpin their own business models. While Ireland is still one of the most ‘cash-friendly’ countries in the Eurozone, the rise in cashless trade in other countries means that many of us will encounter the new reality at increasing rates in 2018.
Frank Conway is the founder of MoneyWhizz.org, the financial education organisation. It promotes better money habits in primary schools, secondary schools, colleges and in leading employers across Ireland.