MARKET COMMENT
The Top Four Big Money Issues Of 2003

By Bruce Jackson (TMFGoogly)
January 6, 2003

The beginning of any calendar year is always a good time to review your finances and to look ahead to the coming twelve months and beyond. With that in mind, I offer you my top four Big Money Issues of 2003™.

1. House Prices

Top of the pops in Christmas party conversation was undoubtedly the soaring house prices seen across most parts of the country. According to the Nationwide, prices rose a whopping 25.3% in 2002. That level of increase is clearly unsustainable. However, as to whether house prices are set to rise further or fall back in 2003, it really is anybody's guess. There are good arguments either way (perhaps the best argument of all is on the very active and popular Fool Property Markets and Trends discussion board - free registration required).

What you can do: How house prices affect you depends on your circumstances. Potential first-time buyers and the buy-to-let brigade are gunning for a slump in prices, whilst most existing home-owners will be hoping prices stay at their current levels or increase further. As far as your own house is concerned, there's not a lot you can do, unless you fancy taking advantage of high prices in your area and moving to a cheaper area, or taking the radical and riskier option of selling up, renting for a few years until house prices fall, and then re-buying at the lower prices. Good luck if you take that route -- you may need it!

2. Interest Rates

Will or won't interest rates rise in 2003? Again, it's a lottery. If I was forced to have a guess, I'd lean towards a fall in interest rates as the Bank of England attempts to stimulate spending in the face of a mini consumer-spending slowdown. Having said that, much depends on the housing market. If it slows, the chance of an interest rate cut increases; if property prices rise, look out for higher interest rates in 2003.

For those people who've taken on substantial mortgages based on today's interest rates, an increase in rates must be their greatest fear.

What you can do: Make sure you have the best mortgage deal possible. If you are really worried about rising interest rates, consider switching your mortgage to one offering a long-term fixed rate. According to Moneyfacts, the cheapest "no extended redemption tie-in" fixed mortgage rate is 3.89% for 3 years from West Bromwich Building Society. Alternatively, consider an offset mortgage, the many benefits of which are outlined in our new 21st Century Mortgage Guide.

3. Credit card debt

Many people's credit cards have taken their usual Christmas hammering, resulting in yet higher outstanding balances. The arrival of the January credit card statement will be a sobering experience. If you run a balance on your credit card, you don't need me to tell you how expensive that monthly interest bill is.

What you can do: The Motley Fool has always encouraged people to pay off their credit card debt. With so many credit card companies now offering 0% interest rates for balance transfers, if you are in debt, a sensible first step to managing and paying off your credit card is to switch to one of these providers. Switching, and then transferring, the balance, is much easier than you think. The Motley Fool credit card centre has a selection of 0% introductory offer providers.

4. Pensions

The final Big Money Issue of 2003™ is that of pensions. Falling stock markets of the past three years have highlighted and exacerbated many people's pension woes. The state pension is just not going to be enough to support most people's retirement spending needs and wants.

What you can do: As the population comes to realise this sorry fact, they are also coming to the realisation that they need to save more for their retirement. The Motley Fool recently put together a collection of articles entitled What Everyone Must Know About Their Pension, including an article about how much you should be saving for your retirement.

Whatever you do in 2003, we urge you to take the time to sort out your finances. The end result should be a better 2003, better years to follow, and a better retirement.