It’s boom time for crystal balls and tarot cards, as people desperately try to work out what the future holds for them, and what they need to do to prepare. 

Forecasting is notoriously difficult, and nobody wants to develop a nickname like Mark Carney’s ‘unreliable boyfriend’ for constantly promising things that never show up. 

However, there are some things we can be relatively confident have a decent chance of materialising in 2025.

Interest rates should be lower by the end of 2025 – We’re in the midst of a period of rate cuts, so all other things being equal, rates will end the year lower. At the moment, markets and economists are expecting three or four rate cuts by the end of 2025, as inflation eases slightly. However, forecasting rates remains fraught with difficulty, and there’s always the risk that inflation proves more stubborn than expected. An awful lot will depend on how the higher minimum wage and rise in employer National Insurance contributions feed through into wages and prices.

Prices are expected to rise – It won’t be anything like as bad as it was at the peak of inflation, but it’s always worth bearing in mind that falling inflation is not the same as falling prices. The Office for Budget responsibility said inflation is still likely to average 2.6% in 2025 – so prices will still be going up.

House prices should rise – but not in a straight line – There are a few things likely to push house prices higher, especially in early 2025, when people will be rushing sales through ahead of the stamp duty holiday ending. Falling rates should also help depress mortgage rates, which is likely to boost sentiment, and therefore prices. It’s not going to be a straight line though, so we could get a lull after the end of the stamp duty holiday, when buying gets more expensive. If interest rates don’t fall as expected, it could also throw a spanner in the works. On balance, we’re expecting prices to rise, but I wouldn’t bet the house on it.

This could be the year of the generous gift – The inheritance tax rules are set to change in 2027, bringing pensions into the estate for inheritance tax purposes, which means between now and then it’s going to focus people’s minds on the potential tax bills that lie ahead. It may well mean more people consider giving lifetime gifts.

Awful April will strike again – The month of nasty price rises is set to deliver a range of hikes from council tax rising by as much as 4.99%, to car tax and the TV licence fee rising with inflation, water bills increasing by an average of £27.40 to £473 and air passenger duty rising. It’s not all bad news though, because although the new energy price cap will kick in, it’s expected to be slightly lower than in January. 

You’ll probably pay more tax – We’re being squeezed on all sides by taxes, but yet again, one of the most far-reaching impacts will be from fiscal drag, after tax thresholds are frozen for yet another year. This includes income tax, which means that every pay rise pushes us into paying more tax and risks taking us over a threshold which means paying at a higher rate. It also includes everything from the inheritance tax nil rate bands to ISA allowances and the personal savings allowance.

Investors are also living with the horrible cuts to their capital gains tax and dividend tax allowances in 2023 and 2024, and now to add insult to injury they face higher capital gains tax rates on stocks and shares – introduced in October. If you made a £15,000 capital gain on stocks and shares, before the budget, after the £3,000 annual allowance, a basic rate taxpayer would pay 10% on gains (£1,200 – assuming the gain didn’t take them over the higher rate threshold). If you made it in January, they would pay 18% (£2,160) – £960 more. It means it will be even more vital to consider whether you can cut your tax bill by using things like ISAs and pensions.

You may end up borrowing more on cards and loans – You’d be forgiven for thinking that as the cost-of-living crisis eases, we’ll borrow less, but in fact we’re borrowing more. This comes partly from the fact that those facing the biggest problems tend to struggle to borrow, so largely fall short on bills, while those further up the income spectrum rein back bigger purchases, so take on less debt.

With a bit more financial freedom, we’ve started gradually borrowing more each month, taking on £33.8 billion more in consumer credit between January and November 2024. Unless we get any major surprises, we can expect this trend to continue.

But you’re still likely to keep your head above water – More tax and higher bills will take a toll, but at the same time we’re still expecting wage rises to remain relatively robust – particularly down the lower income end of the spectrum where there are some generous minimum wage rises on the way in April.

9. Some people will be in for a pension shock – The Hargreaves Lansdown Savings & Resilience Barometer shows that only 38% of households are on track for a moderate retirement income, so there’s bad news looming for an awful lot of people. The whole issue of pension adequacy was due to be discussed in the second part of the government’s pension review. This was meant to start shortly, though recent reports suggest it has been postponed. This means it could take even longer for people to realise the work they need to put in to make up a shortfall.

Annuities will continue to be popular, but incomes could fall – Annuities have had a bumper year in 2024 and interest in them is expected to remain strong, even in the face of potential interest rate cuts that could push incomes down. However, when these cuts come, they will not happen anywhere near as sharply as they did when interest rates were raised. We also are unlikely to see interest rates fall to the levels that we had. These factors should help support annuity incomes and tempt more people on the hunt for a guaranteed income in retirement to take the plunge.