Consumer Corner: Will we be richer or poorer in 2025?

Pic: iStock

Oh, we hear you. Is it even possible to struggle any more with day to day finances than it was in 2024? 

The cost of everything seemed to skyrocket in recent years, from eating out to groceries to the cost of heating your home. Despite some relief, prices remained high in 2024 and for many it was hard to make ends meet.

However 2025 is a new year, with new possibilities, but what is in store for our pockets and our finances? 

From mortgages to energy prices to Trump becoming President, we take a look here at how we might fare in 2025 when it comes to the money in our wallets.

Energy costs will continue to be a hot topic this year and although there were some price cuts in 2023 and 2024 the expert advice is not to bet on big cuts this year. Gas and electricity prices are now around 25 percent below their peak at the height of the energy crisis.

Daragh Cassidy from Bonkers.ie says that for anyone wondering if gas and electricity prices will fall further in 2025 they shouldn’t bet on it.

“Wholesale gas prices are still over double, what would until recently, have been considered normal levels. This doesn’t look like changing much over the coming year. And of course any further outbreak of war or conflict could see prices shoot even higher.

"Wholesale electricity prices also remain very high. However, wholesale prices only make up around half of a household’s energy bill. There is also VAT, Government levies, grid fees and the suppliers’ operating costs to take into account.”

At the end of this April, the Government is due to hike back up the rate of VAT on gas and electricity from 9 percent to 13.5 percent. If implemented, this would add around €70 a year to the average electricity bill and €60 a year to the average annual gas bill.

“And of course the carbon tax goes up again next May. That will add another €20 or so to the average annual gas bill,” says Mr Cassidy.

“The cost for maintaining the country’s gas and electricity grids also continues to rise. The challenge of trying to get to Net Zero and dealing with a rapidly growing population is also requiring big investment in our grids.”

One of the biggest outgoings for many consumers each month is their mortgage and last year the European Central Bank cut interest rates four times and it’s expected that it’ll reduce rates even more in 2025. 

The latest ECB survey of professional forecasters predicts that the ECB refinance rate will fall from 3.15 percent today to 2.25 percent by the end of 2025, a reduction of 0.9 percent.

Mark Coan of moneysherpa.ie says that this will be good news for tracker mortgage holders, who will also see their rates fall by that amount.

“For other mortgage holders though things are less clear, as Irish banks in the main did not pass on increases to non tracker customers when rate rose further significant cuts to fixed and variable rates seem unlikely. So if you are thinking of buying or switching early 2025 is as good a time as any to make a move.”

One of the big talking points in 2025 will be pensions with the auto-enrolement scheme expected to go live in September. 

This is where employees will be automatically enrolled in a pension into which both the Government and the employer make contributions. Similar schemes have been in operation in the UK and Australia for years.

“If you’re already contributing to a pension, then the scheme won't really have much of an impact on you. But if you’re not, then you’ll have to start paying into one, so you could see a fall in your take home pay from next autumn,” says Mr Cassidy.

John McNicholas of Everlake says that if you don’t have access to a workplace pension or are self-employed, consider setting up a personal retirement savings account (PRSA) or another private pension option. The tax relief on pensions is unparalleled, making them one of the most effective ways to save for the long term. “No investment strategy is likely to outperform the tax advantages offered by pensions.”

Over the water the election of Donald Trump could have an impact on our finances in 2025.

“The president elect has plans to impose a range of tariffs on all types of goods being imported into the US. This could have an impact on economic growth here in Ireland given our big trading relationship with the US.

“But if the EU retaliates with tariffs on US goods entering the EU, then consumers could see a range of popular American goods increase in price,” says Mr Cassidy.

Mr McNicholas says that starting 2025 on the best financial footing begins with a clear, strategic approach to managing your money.

“At a time when cost-of-living pressures and future financial security are key concerns for many, taking practical steps now can pay off significantly in years to come."