After another difficult year for hard-pressed consumers, will 2024 be any kinder?
2023 saw consumers having to deal with high inflation, several interest rate hikes, rising health insurance costs, and an ongoing energy crisis.
From energy and banking to broadband and insurance, we look at whether 2024 will be any kinder to our pockets.
Most of 2023 saw gas and electricity prices remain at record highs.
However there was some good news towards the end of the year when a new supplier, Yuno Energy, entered the market and helped spark some competition in the sector. And in the October budget the Government agreed to keep the reduced 9% rate of VAT on energy bills for another year as well as announcing a new €450 electricity credit.
Then in October and November, all the main suppliers reduced their prices by around 10% to 20%. However despite the price drops, energy prices in Ireland are still around double normal levels and among the most expensive in all of Europe.
Just recently, in December, SSE Airtricity surprised the market somewhat by announcing a second price reduction in just three months (-11.5% on gas and -12.80% on electricity) which will come into effect on 1st February and it’s likely all the other suppliers will broadly match this early in the New Year.
And if wholesale prices remain close to where they currently are or even ease a bit more, as is expected, it’s likely there'll be another round of price decreases from all the main suppliers of around 10% to 15% in the latter half of next year.
This means by the end of 2024 we should see energy prices around 30% to 35% BELOW where they were at the start of 2023. However this would still leave prices around 50% ABOVE where they were in early 2020, before Covid and then the war in Ukraine wreaked havoc with energy prices. And prices may never return to these levels unfortunately.
And if the Government decides to end the reduced rate on VAT on energy bills at the next budget, this will reverse some of the decreases.
This year wasn’t a great year for mortgage customers, especially those on trackers, as the ECB continued to hike rates.
In early 2021 it was possible to get a mortgage rate as low as 1.90% in Ireland, albeit with several caveats.
The current lowest rate is now 3.65%, which is a green rate. While the average rate is 4.27% according to the Central Bank of Ireland.
Thankfully it looks as if the ECB has come to the end of its rate hike cycle which means we should see no more rate hikes in 2024.
The question now turns to when the ECB might start to cut rates. And by how much.
The markets seem convinced that the ECB will have to start cutting rates as soon as March or April due to plummeting inflation and a flagging eurozone economy.
However it may be a bit later than this.
But what this means is that tracker customers in particular can breathe a sigh of relief as they’re almost guaranteed to see their mortgage rate fall next year.
For everyone else such as those on variable rates or those looking to re-fix, it’s a bit tricker.
The main Irish banks have passed on less than half of the ECB rate hikes so far (the exception being the vulture funds of course). Mind you, rates were very high here to begin with. But it does mean it’s unlikely we’ll see the main banks respond to the ECB rate cuts immediately. Indeed some of the main lenders may even hike some of their variable and fixed rates again in the New Year.
And if the ECB only cuts rates by 0.25 or 0.50 percentage points next year, then the banks may not reduce their rates at all. At least initially.
Whether you're looking to buy, move, or switch, you can compare interest rates across all lenders on bonkers.ie using our free mortgage calculator.
Petrol and diesel
From a year high of around €1.85 a litre in September, petrol and diesel prices have eased slightly in recent weeks due to a fall in the price of oil as well as a slightly weaker dollar (oil is largely bought and sold in dollars on international markets).
It means fuel prices have ended the year close to where they started at around €1.75 a litre.
However from next April excise duty is due to increase by 8 cent a litre on petrol and by 6 cent a litre on diesel as a result of the final reversal of excise duty cuts that were introduced by the Government in March 2022 at the height of the energy crisis.
And in October another increase in the carbon tax will see just under 3 cent more added to a litre of petrol and diesel.
It’s also likely oil will increase at least slightly in price next year as OPEC looks to support prices by cutting output while the euro is unlikely to strengthen much further against the dollar.
All told, it means prices could start nearing €2 a litre at the pump again as we head into the second half of next year.
Broadband, mobile and TV services will all become more expensive next year.
In 2021 and 2022 many telecommunications providers started announcing inflation-busting price increases under so-called 'annual price adjustments'.
Vodafone has started increasing its plans by the annual CPI rate of inflation as of January every year PLUS 3%, with the change taking place every April. Eir has started doing the same.
With the rate of inflation for 2023 likely to come in at around 6%, Eir and Vodafone customers will see their bills jump by close to 10% in April.
However households can beat these increases by switching with lots of good deals on offer from all the main providers to new customers.
Some streaming services are likely to increase in price yet again as streaming services continue to spend a fortune on producing more and more content for insatiable viewers.
Our money is on Disney+, Apple TV+ and Paramount+ upping their prices towards the end of next year.
Expect to hear lots more talk about pensions and auto-enrolment in 2024.
An auto-enrolment scheme, where workers are automatically enrolled in a pension into which both the Government and the employer make contributions, has long been mooted in Ireland, and similar schemes have been in operation in the UK and Australia for years.
Although it's unlikely the scheme will actually go live next year, legislation to enact it should finally pass through the Oireachtas. Meanwhile the third-party operator that will build the IT system for the scheme will hopefully be appointed by The Department of Social Protection early in the New Year.
You can learn more about the auto-enrolment here.
A recent report from the Central Bank showed that the cost of motor insurance fell by 7% in 2022 versus 2021 as reforms aimed at tackling excessive personal injury payouts seem to be working.
The average motor insurance premium in 2022 was €568, and it fell to €555 in the final quarter of that year. In 2017 it reached a high of €710.
For this year, premiums have held reasonably steady, up by just 1.8% over the past year, according to the CSO, which was well below the general rate of inflation.
Looking forward to next year, it's likely premiums will stay reasonably steady as falling inflation and the aforementioned insurance reforms keep premiums under check. As always, it's important you shop around for the best value as new customers can still make big savings by switching.
2023 saw the three health insurers (VHI, Irish Life, and Laya - now Axa) announce several price hikes.
And 2024 will start off on a bum note for Irish Life customers as the insurer increases its prices by 4.8% from January. This comes on the back of two other recent hikes from Irish Life which will leave some of its plans 20% more expensive for those renewing.
And things aren't much better for customers of VHI and Axa.
Insurers blame the recent premium hikes on a big increase in the number of claims and those seeking care in private hospitals. And it's likely 2024 will see yet more premium hikes as medical inflation and the cost of delivering healthcare gets ever higher.
In slightly better news, the health insurance regulator has cut the level of stamp duty on all health insurance policies for next year.
The stamp duty that's collected each year is used to support Ireland's community rating system which allows everyone, regardless of age, health, personal circumstances or sex to be charged the same amount for the same level of cover.
If the saving is passed on by insurers, it will result in around three quarters of policyholders paying €18 less for their health insurance in 2024. Hardly a lot, but every little help as they say...
Deposit return scheme
One of the biggest social and behavioural changes since the introduction of the plastic bag levy or even the smoking ban is about to go live - the new deposit return scheme.
The scheme will come into effect from 1st February and will see a deposit or levy of between 15 cent and 25 cent added to certain drinks containers.
Although it is refundable, it'll see a lot of popular items shoot up in price and could lead to higher costs for consumers unless they studiously return all their cans and containers.
- A standard 330ml can of Coke that might have cost €1.50 previously will now cost €1.65
- A four-pack of 330ml cans of Coke that retails for €4.90 at present will now be €5.50
- A four-pack of 750ml Evian water that retails for €4.39 at present will now be €5.39
- A 1.35 litre bottle of Innocent orange juice that retails for €4.99 at present will now be €5.24
- An eight-pack of 500ml Guinness draft beer that retails for €16 at present will now be €17.20
You can learn more about the new scheme here.
Inflation and overall economic outlook
It's fair to say household finances have taken a bit of a battering over the past two years.
Since 2001 food costs have jumped around 20%. And the introduction of minimum unit pricing on alcohol has seen some cheaper wine and beer shoot up in price.
Streaming services like Netflix and Disney+ have also seen big price jumps. Tolls have gone up. And broadband and TV services have gone up around 15% with some suppliers due to the introduction of annual price adjustments each April.
And even after the energy price cuts we saw in October and November, gas and electricity prices are still around double normal levels.
All told, the average household is around €3,500 a year worse off. And that’s before you even take into account changes to mortgage rates.
However it has to be remembered that Government supports have taken the sting out of a lot of this. Energy credits of €1,250 in total will have been paid by next March. Those on the fuel allowance will have got hundreds of euro extra in support. And several double social welfare and child benefit payments have been paid. But most households’ standard of living will still have taken a fall.
But the worst of the cost-of-living crisis does appear to be behind us and next year we should see inflation continue to ease while falling gas and electricity prices and falling interest rates should ease the burden on many consumers. A big increase in the minimum wage to €12.70 an hour from January will also help the lower paid.
However food costs are unlikely to fall by much. If at all. And next year there's unlikely to be another round of energy credits in the budget or as many lump sum welfare payments.
But barring another economic shock of some sort, things for consumers look a bit better and the overall outlook for the economy looks relatively benign.