Tuesday 30 August 2011

A TIME TO CHANGE?

Mortgage lenders have been reducing rates generally and fixed rates for 3 and 4 years are now under 3.0% and 5-year rates at 3.5%. While the economy is probably going to mean that the Bank of England interest rate will remain low for some time still to come, those who want some future security should consider moving to one of the new fixed rates for 3 years or more.

However, these best rates are really only available to those whose borrowing is 70% or less of their property value and who can prove adequate income and have no credit problems. For those not in this category, rates are not going to be as competitive and it may be best to stay with your present lender. But feel free to give us a ring to check it out for you. We make no charge to investigate what might be available for you.

Wednesday 24 August 2011

Inflation eases

Inflationary pressures eased slightly during June, curbed by weak consumer spending. The Consumer Price Index rose at an annualised rate of 4.2% in the year to June, compared with 4.5% in the year to May. According to the Office for National Statistics, the decline was caused by lower prices for recreational goods such as computer games, toys, televisions, and digital cameras.

Nevertheless, the rate of inflation remains significantly higher than the Bank of England’s (BoE’s) government-set target of 2%, although policymakers expect inflation to fall more in line with the target after 2012. In the meantime, the BoE’s Monetary Policy Committee (MPC) continues to grapple with the conundrum of how best to cool inflationary pressures without derailing the UK’s sluggish economic recovery.

Interest rates have remained at a record low of 0.5% since March 2009; this is good news for borrowers, many of whom are enjoying an improvement in the availability and terms of mortgage deals. However, low interest rates spell bad news for savers, who continue to struggle with low interest payments. There is some dissent within the MPC – two members of the Committee voted for an increase in interest rates at the MPC’s June meeting, while seven members voted in favour of maintaining rates at 0.5%, believing that higher tax rates and cuts in public spending will have a naturally depressing effect on prices.

The British Chambers of Commerce (BCC) has pointed out that many of the factors fuelling inflation are beyond the control of the MPC: domestic inflationary pressures are being exacerbated by external factors, such as natural disasters in key commodity-producing countries. Producer price inflation accelerated between May and June; meanwhile, energy prices continue to rise and British Gas recently announced an increase in its tariffs. The BCC has urged policymakers to postpone any increases in interest rates until the fourth quarter of 2011 at the earliest.

According to a study undertaken by the British Retail Consortium (BRC) and Nielsen, prices in shops posted their strongest increase for two and a half years during June, rising by 2.9% year on year. The increase was fuelled by rising prices for food and commodities. Nevertheless, shop prices are rising more slowly than the broader measure of inflation: 39% of spending on groceries is on promoted goods, and the BRC believes that retailers are using discounts to generate sales at the expense of margins.

Tuesday 16 August 2011

Equity release myths

For many retirees – as well as those considering their retirement plans – their home is likely to be their largest asset. In an environment of high inflation and low savings rates, money can be tight for pensioners, but misconceptions about equity release plans might prevent retirees from releasing the value tied up in their home. Research by Safe Home Income Plans (SHIP), the trade body for equity release providers, has found a number of myths that persist about equity release plans.

1 – 69% of UK consumers believe you risk losing your home. However, you can remain in your property for life as long as it remains your main residence. In cases in which a couple is involved, this rule will apply to the last surviving member of the couple.

2 – 67% of UK consumers believe you will not be able to leave an inheritance. In fact, when you die, your home will be sold and the money used to pay off the loan. Although an equity release plan will reduce the value of your estate, any money left over will go to your beneficiaries. Taking out an equity release plan could also help by reducing inheritance tax liability.

3 – 52% of UK consumers believe you will not be able to move house. In practice, you have the right to move your equity release plan to another suitable property without suffering any financial penalty.

4 – 47% of UK consumers believe equity release plans are unsafe and unregulated. However, all members of SHIP have to abide by a rigorous complaints procedure to satisfy the Financial Services Authority.

5 – 43% of UK consumers believe your children will have to repay the loan themselves. In fact, you will never owe more than the value of your home and no debt is ever left to the estate. Importantly, SHIP providers also offer a no-negative-equity guarantee.

It is important not to confuse equity release plans with sale-and-rent-back arrangements, in which the house is sold – often at a discount – to a third party and then rented back to the vendor for a specified period. These arrangements tend to be an action of last resort, involving those in serious financial difficulties.
Equity release refers to Home reversion plans and Lifetime mortgages. To understand the features and risks ask for a personalised illustration.

Wednesday 3 August 2011

Living to 100 – Centenarians on the increase

It has long been accepted that improvements in medicine, lifestyle and an understanding of the effects which habits such as smoking can have on our health means life expectancy is increasing. Future generations are likely to enjoy much longer and healthier lives on average than their predecessors.

However, figures released in April 2011 by the Department of Work & Pensions (DWP) illustrate more accurately exactly what that means. These figures suggest, of the under 16s already alive today, over a quarter are going to reach the age of 100 – and already, the average new-born female is going to live to over 90.

As Steve Webb, Minister for Pensions, commented at the time, this means that millions of people will spend over a third of their life in retirement. However, as the DWP were quick to point out, this news also coincides with a period during which pension savings are in serious decline.

An ageing population is putting our welfare system under significant pressure as more people need not only pension income but also healthcare, incapacity support and help within the home. You can therefore have little expectation that a State Pension will provide anything other than a safety cushion when the time comes. If your retirement plans include holidays, visiting relatives and treating yourself on occasion, then its time to take control of your savings and start building up a retirement fund of your own.