by admin | Jun 11, 2021 | Mortgage News
According to the Office for National Statistics, UK inflation more than doubled from March (0.7%) to April (1.5%). At any other time, this data might have been met with gasps of pure horror. Right now, however, the situation is a lot more complicated. Here’s a quick guide to what you need to know.
The world is finally getting back to business
COVID19 is not yet consigned to oblivion but it’s getting there. This is allowing the world, in general, to get back to business. Of course, with so many businesses having been mothballed for most, if not all, of the last year or so, there’s a lot of catching up to do. In particular, the logistics industry needs to deal with a serious backlog – and the recent issue with the Suez Canal didn’t help with that.
This means that right now supply-side issues are limiting the availability of some items right at a time when demand is increasing. Businesses are opening up again, so more jobs are becoming available. Furloughed workers are returning and remote workers are starting to go back to the office at least part of the time. In some cases at least, this will mean them spending money on purchases such as clothes, transport and convenience food and drink.
Overall, therefore, it’s hardly a surprise that UK inflation has shot up. In fact, it would arguably have been more of a surprise if it hadn’t. That doesn’t mean that the increase is welcome news to everyone. As always, there are two sides to every story.
Why inflation is bad news
Inflation basically means rising prices. If you’re in strong economic shape, then you can absorb them. If, however, you’re not, then they can be extremely painful. The financial impact of the pandemic has been extremely uneven, to put it mildly. A few people have, quite bluntly, done extremely well out of it. Most people have been able to get by, albeit possibly only just.
For some people, however, the pandemic has wrought serious havoc on their finances. What’s more, a lot of these people would probably have been living on the financial edge anyway. These people may have to deal with prices rising ahead of their income. They may also face the prospect of interest rates rising in line with inflation. This would make using credit as a stopgap even more expensive.
If interest rates do go up, then the cost of mortgages may go up with them. This is, however, also variable, at least in the short term. If new buyers have opted for fixed-interest loans then interest-rate changes will not affect them until the fixed-term runs out. Established buyers with variable-interest loans could switch to a new deal. Those most in danger, therefore, are recent buyers with variable-rate loans.
Why inflation is good news
Inflation encourages people to get out and spend. In short, the message is that you can either buy now or risk the price going up later. Obviously, there are limits to this. If people can’t afford something now then they can’t buy it regardless of whether or not it seems like a good deal. What’s more, if inflation gets seriously out of control then it may result in major social upheaval.
The UK is, however, a long way off this. Although 1.5% is way above 0.7%, it’s still comfortably below the Bank of England’s inflation target of 2% with a 1% margin of error in either direction. In fact, 0.7% inflation was actually too low to be desirable. Under normal circumstances, the Bank of England would have been expected to take corrective action.
In short, therefore, the surge in inflation is essentially just a sign that the UK’s economy is starting to get back to where it should be. That fact should be welcomed by everyone.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up
repayments on your mortgage
Please contact us for any more information
by admin | Apr 16, 2021 | Mortgage News
Vaccines are being rolled out and spring is rolling in. That’s two reasons for there to be good cheer throughout the UK. Will this mean good cheer for the property market? Here are some factors to consider.
The economy should be reopening
All four parts of the UK have mapped out plans to exit lockdown. Admittedly those plans will depend on circumstances. In principle, there could be halts and even backwards steps before the UK emerges from the pandemic. Overall, however, the general direction of travel should be very clearly towards a post-lockdown “new normal”.
Reopening the economy should have the very practical benefit of improving housing affordability. Of course, it would be unrealistic to expect too much too soon. It’s reasonable to assume that some sectors and job areas will recover more quickly than others. In blunt terms, the less a sector has been hurt, the quicker it will recover.
That said, as sectors recover, the benefits of recovery should begin to spread. For example, as people get their jobs back they will have more disposable income. This can then be spent at other businesses.
People will have clarity on remote working
Companies are going to have to decide whether or not they’re going to support remote working over the long term. This doesn’t necessarily have to mean full-time remote working. Even companies deciding to offer flexible/hybrid working could have a meaningful impact on the housing market.
In simple terms, if remote working goes mainstream, cities and traditional commuter-belt areas could lose their appeal. They could be overtaken by areas where people can afford more space (inside and outside). These areas could have longer commutes, but if people are making them less often this could be an acceptable trade-off.
The Stamp Duty holiday is still on
New buyers might have to more very quickly indeed if they want to get the full benefit of the Stamp Duty holiday. That said, it’s not entirely impossible. If sellers are prepared and conveyancers are available and everything goes smoothly it could be done.
Even if they miss out on the full discount, however, there is still the “consolation prize” of a lower discount available for three months after the main holiday ends. What’s more, if the Chancellor then puts Stamp Duty back as it was, then first-time buyers will still benefit from reduced Stamp Duty after the end of the temporary tax break.
Help to Buy has been extended
This isn’t exactly news, but it’s still relevant. The initial Help to Buy scheme has been extended to counterbalance delays caused by COVID19. The new Help to Buy scheme will be implemented as planned. The government has also outlined an initiative to provide guarantees for 95% mortgages. This is, however, still in the pipeline.
Interest rates remain an open question
The Bank of England advised banks to prepare for the possibility of negative interest rates. Of course, that’s not at all the same as saying that they will actually happen. It is, however, making the point that they cannot be ruled out. Although negative interest rates are not at all a new concept, they would be new to the UK. Hence it’s anyone’s guess what their impact would be.
At the same time, interest-rate increases cannot be ruled out either. Obviously, if interest rates go up, then this could reduce affordability. That said, if interest rates were going up as a result of strong economic growth, the end result could still be positive.
The housing supply is unclear
Buyers need there to be sellers. Currently, it’s unclear how much new-build and existing property will be on the market this spring. Lack of supply could put a damper on the housing market. It could, however, alternatively lead to fewer transactions of higher value.
Your property may be repossessed if you do not keep up repayments on your mortgage.
For more mortgage information please contact us
by admin | Mar 20, 2020 | Mortgage News
We wanted to ensure that our clients and others that may have concerns right now have information that they need, so we’re sharing some ways in which we can help.
The Bank of England has slashed interest rates to combat coronavirus ‘shock’ – what it means for you.
The Bank of England has cut the base rate to 0.1% in an emergency response to the “economic shock” of the coronavirus outbreak. This makes the interest rate the lowest ever in the Banks 325-year history. In a dramatic move by the new governor, Andrew Bailey, the surprise cut was a response to the “economic shock” of coronavirus and would “help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance”. In response, many lenders have reduced their rates, and we are seeing incredible low fixed and discounted rate products. Now is a great opportunity to look at taking advantage of the rate cut and potential to re-mortgage to a lower rate, to provide a saving on your monthly payments and some certainty for your payment amounts in the challenging weeks and months ahead.
Protecting your health and income
Having a mortgage that is covered and will be paid in the event of you not being able to work or if you have a critical illness or worse is so very important. I am / we are very happy to discuss your needs over the phone so there is no need to travel to come in to see me/us and if there are plans we can help to arrange for you we can manage everything for you from here.
As the situation develops, understandably, we have received many questions in relation to protection policies and customer queries. We have tried to generally summarise some of them below, in a format you can share with customers:
If I am diagnosed with Covid 19 – Do I have to tell my existing Insurers?
Life Insurance Policy owners
No – you advised Insurers at the time of your application about your health situation. As long it was accurate, then no further action is needed.
Reports currently show that the vast majority of fit and healthy people recover. If sadly you passed away from Covid 19 – the Insurers will payout as per any other valid claim.
Check if your plan was written into trust. If so, your trustees need to be notified. Also, please check any wills made are up to date.
Critical Illness Policy owners
No – you advised Insurers at the time of your application about your health situation. As long it was accurate, then no further action is needed
Covid 19, specifically, is not classed currently as a critical illness, so you cannot claim. Reports currently show that the vast majority of fit and healthy people recover.
However, if for whatever reason associated health issues occur that your Critical Illness policy could then cover, then you could make a potential claim.
If sadly you passed away from Covid 19, the Insurers will payout as per any other valid claim if your plan is also combined with life insurance.
Income Protection & Accident Sickness Policy owners
Covid 19 is classed currently as a valid income sickness claim.
Check if your policy offered cover starting at Day 1 or after 1 week waiting claim period ( often the most expensive option )
Alternatively, if it was after 4 or 8 or 13 weeks etc; you may still be able to claim if your health situation is ongoing.
Sadly if you then pass away from Covid 19, some Insurers will payout as per any other valid claim if your plan also included any life insurance element.
If I have to self isolate – Do I have to tell my existing Insurers?
Income Protection & Accident Sickness Policy owners
Yes – Coronavirus self-isolation is classed currently as a valid income sickness claim for some Insurers.
If your policy offered cover starting at Day 1 or after 1 week waiting claim period, you may be able to make a valid claim.
Alternatively, if it was after 4 or 8 or 13 weeks etc; you may still be able to claim only if your situation is ongoing.
Note: many Insurers are now excluding self-isolation on their new plans
Negative Mental Health impact of Covid 19 – Stress & Anxiety
Psychotherapists and charities such as Mind have said that the coronavirus outbreak may be having a negative impact on
our everyday mental health and wellbeing ( especially for those who have currently or previously mental health conditions ).
The World Health Organisation (WHO) also acknowledged that this Pandemic is causing stress. They advise people to avoid news that causes feelings of stress and anxiety.
Many protection policies may offer mental health helplines or provide health information services as part of the premium.
What if I temporarily lose my income & livelihood – I may not be able to pay for my Protection Policy & have to cancel it?
Millions of people across the world it seems are going to be in the same situation, as this is unprecedented for most in our lifetime.
Contact your Bank, Mortgage Lender, Loan Company, Credit card etc; immediately – about how Coronavirus is impacting your family finances
All lenders currently have already implemented some backup support systems to help ordinary people out financially in the short term
https://www.lloydsbank.com/help-guidance/coronavirus.html#manage
https://home.barclays/news/2020/03/supporting-customers-affected-by-coronavirus/
https://www.halifax.co.uk/helpcentre/coronavirus/Default.asp
https://supportcentre.natwest.com/Searchable/1459340472/I-m-worried-about-Coronavirus.htm
https://www.tsb.co.uk/coronavirus/
https://www.business.rbs.co.uk/business/support-centre/service-status/coronavirus.html
https://www.santander.co.uk/about-santander/media-centre/press-releases/santander-uk-outlines-support-for-customers-during-coronavirus-outbreak
https://www.bbc.co.uk/news/business-51817947
https://www.british-business-bank.co.uk/ourpartners/supporting-business-loans-enterprise-finance-guarantee/
https://protectionguru.co.uk/coronavirus-updates/
What if I cancel my Insurance Protection policy temporarily… and then intend to take it out again when things improve financially?
If you sadly become ill or pass away from Covid 19, your protection insurance policy would not payout, as you have no cover at the time of claim (i.e; Catch 22 as you have cancelled it).
Should you then be diagnosed with Covid 19 or in ‘self-isolation’, your Insurers may postpone allowing you to buy any new insurance policy until you fully recover.
Any associated symptoms resulting from Covid 19 could mean any new protection policy is more expensive, or in the worst case, insurers decline to offer another protection policy.
Unrelated to Covid 19, if your health, lifestyle or age changes between taking out the previous policy and any new one, then this will affect the cost of taking out another policy.
Some Insurers may decline to offer another protection policy based on this information or on any market conditions at that time.
Please note: Your current policy may have no surrender cash-in value. Check the small print T&C’s of your policy.
We hope that this answers some of the questions you have. For policy guidance on specific situations, you should contact your provider’s helpline.
So please don’t hesitate to contact us to see how we can help you generate some real certainty in these unprecedented times. We are available by many non-face to face means to talk, as many of us work from home and have some additional time to plan for the future, contact us today to see how we can help.
Additionally, as the impact of the outbreak affects those around us in our extended families, companies and communities, please share this message through conversation and social media we are here to help, support and offer guidance.
by admin | Nov 30, 2019 | Mortgage News
Interest-only mortgages are exactly what they sound like. During the lifetime of the mortgage, you only repay the interest on the mortgage. The principal only becomes repayable at the end of the term. On the one hand, this keeps your monthly payments low. On the other hand, it means you pay the maximum amount of interest because the amount owed does not go down over the term of the mortgage as it does with repayment mortgages. It also means that there is a huge bill waiting for you at the end of the term.
Interest-only mortgages are still very much alive and kicking
These days, interest-only mortgages have just about disappeared from the residential-mortgage market. They are still very much in use in the buy-to-let market but that is another situation. There are, however, still a number of “legacy” interest-only mortgages at various stages of maturity and if you hold one of them, then you need to start thinking seriously about your options.
Option 1 – convert to a repayment mortgage
This may not be as easy as it sounds given that interest-only mortgages are more affordable month-to-month than repayment ones, so, you may find that the higher payments required for a repayment mortgage are out of your reach, especially if you are due to retire over the course of the term. On the other hand, it might not be out of the question either, especially if you are going to be working for most of the term. Although you will not have any equity in your home, if it’s value has gone up, then that will effectively act as a deposit for you and reduce the amount you need to borrow.
Option 2 – sell your home
You don’t have any equity in your home, so equity release isn’t an option. In practical terms, you’re just renting it from the bank, while you work on getting the money together to buy it outright. In principle, you have an advantage over renters in that you can do what you like with and in your own home. The flip side of this, however, is that you also have the responsibility of maintaining the property.
If you can’t convert to a repayment mortgage and don’t yet have a feasible plan in place for paying off the principal at the end of the term, then it might be best to consider whether or not you really stand a decent chance of being able to do so and, even if you do, whether you’re really willing to do whatever it is you’re going to need to do to make that happen. In other words, how much of a sacrifice are you willing to make?
Unless you are 100% sure that you can get the necessary funds together and that you’re willing to do whatever is necessary to achieve your goal, then it might be best just to grit your teeth and sell your home, even if you are in negative equity, because there’s no guarantee that the situation will get better if you wait. In fact it might get worse.
Option 3 – increase your income so as to be able to make the repayment
There are lots of potential ways to increase your income from monetizing your home in some way (e.g. renting out a room), to starting a side-hustle, to looking at savings and investments. Each has different advantages and disadvantages and chances of success. If you’re going to go down this route, then it may make sense to talk with a financial adviser so that you can get an unbiased second opinion on how practical your plan is likely to be and whether there are any adjustments you could make which might improve its chances of success.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Equity Release refers to home reversion plans and lifetime mortgages. To understand the features and risks, ask for a personalised illustration.
For equity release, savings and investments we act as introducers only.
by admin | Sep 27, 2019 | Mortgage News
In the UK, interest rates have now been so low for so long that even those who are, technically, old enough to remember the double-digit inflation of the 1980s, may have forgotten what it meant in practice. It meant that cash deposits could bring could returns for savers – but borrowing could be eye-wateringly expensive. With Brexit on the horizon and a “no-deal” looking close to certain, now may be a good time to go over interest rates, the theory and practice.
When currencies weaken, interest rates tend to go up
The Monetary Policy Committee of the Bank of England is tasked with keeping inflation at exactly 2%, but since this is the real world, it is allowed a 1% “margin of error” either way. If inflation falls below 1% or rises above 3%, however, the Bank of England has to write an open letter to the chancellor explaining what it intends to do about it. If inflation falls below 1%, the BoE has two options. It can lower interest rates (assuming there is room for it to do so) or it can implement a programme of quantitative easing. When inflation goes up, however, the BoE’s only option is to increase interest rates.
The Brexit question
If Sterling weakens due to Brexit (or for any other reason), it will increase the cost of importing goods from overseas. If this cost is offset by gains elsewhere, such as inbound tourism, then the net effect may be zero (or close to it), but if it is not, then either the UK will have to cease (or severely limit) its imports and/or inflation will increase and in the latter case the BoE will be forced to raise interest rates to meet its 2% target.
The only other option would be for the government to change the inflation target in some way, either by permitting inflation to go higher or by changing the means by which it is measured (such as the change from the Retail Price Index to the Consumer Price Index). This is certainly possible, but it would be politically challenging. Allowing inflation to rise would potentially impact everyone, including borrowers, whereas allowing interest rates to rise would benefit savers but hurt borrowers. Raising interest rates would also, at least potentially, make Sterling more attractive on the international markets, thus potentially bringing the value of the currency back up and lowering inflation naturally. Having said that, this tactic did not work for John Major back in 1992, when the UK exited the ERM.
What this means in practice
In very blunt terms, Brexit could mean that savers finally get to see better returns on their cash deposits and borrowers start to see an increase in the cost of financing their debt. Having said that, it is still very possible that savers will not see enough of a benefit to make it worth their while to readjust their asset allocation in favour of cash. Borrowers, by contrast, will have no option but to swallow up the higher interest rates as they will be reflected across all lenders albeit to varying degrees. This means that it is now critically important for borrowers to do everything in their means to pay down debt as quickly as possible and the higher the level of interest payable on the debt, the more important it becomes to pay it down. If borrowers are unable to pay down their debt immediately, for example, if they have mortgages with long terms, then it may be worthwhile to switch to a fixed-rate product so at least they will have the security of knowing what their payments will be over the life of the product. As always, however, individuals will need to do their own sums to see if this approach makes sense in their own situation.
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