The more things change, the more they stay the same.  It may be one of the oldest cliches around but, as is so often the case, there’s a lot of truth in it.  In the context of finance, it means that although your priorities will almost certainly change as you go through life, your basic approach to managing your finances should stay much the same.  Here are four points to help. Start by thinking who really matters to you in your life Self-care isn’t selfish, it’s a necessity because you need to take care of yourself in order to stand a chance of being able to take care of other people.  Therefore any financial plan should start with making sure you are protected against whatever life can throw at you.  In your pre-child stage you may not need life insurance (unless you have a mortgage), but you may want to think seriously about health insurance, or at least dental insurance.  If you have children, you may want to think about insuring their health too.  You may also want to look at income protection cover even if you’re employed (as your state benefits/employment benefits may not turn out to be as generous as you might have hoped) and again if you have children (or aging parents) and your partner is a home-maker/carer for them, then you may want to insure them against ill-health and death.  Remember your pets too, they don’t get to use the NHS so their medical bills can get very expensive! Think carefully about your journey through life and the key milestones on the way When you’re in your twenties, finishing your studies, establishing your career and buying your first home may all seem far more pressing priorities than saving for retirement and, in a sense they are in that they are shorter-term goals, but the retirement savings you make in your twenties have literally decades to grow and so should not be overlooked if you can possibly find the money.  As you move into your thirties and forties, your priorities may shift into financing your children, those (expensive) early years and then their move into the adult world.  By your fifties and sixties you will probably be thinking about your post-paid-employment years and then once formal retirement actually becomes a reality you’ll then need to adjust to your new situation and think about estate planning. Learn to love budgeting Budgeting may sound boring, but it’s the foundation of living your life on the financial straight and narrow and hence should be considered very interesting.  At its core, budgeting is the art of setting priorities, which is why it comes after our first two points.  Only you can decide what matters most to you in life and to what extent you’re prepared to save in the present to have a better future or, by contrast, live for the present and accept the fact that this may entail making some compromise later down the line.  There is no right or wrong here, the important point is that you take the decisions which are right for you, with a full understanding of their implications. Always remember that you’re never too young or too old for sound advice Even if finance is your day job, you can still benefit from a fresh pair of eyes looking at your situation as they can spot what you might miss.  If you’re not a financial expert, then you risk taking important decisions without understanding their full implications.  Ideally, we’d suggest checking in with a financial professional once a year or so to make sure your financial life is (still) on the right track, but as a minimum, at least think about taking professional advice before you make significant financial decisions. For pension, investments, dental insurance, estate planning and pet insurance we act as introducers only.

On a personal level, you may be wondering where the year has gone and why Christmas seems to start earlier and earlier (with both Selfridges and Tesco beginning their Christmas promotions in August).  To refresh your memory, here is a quick guide to the key events of 2018 so far. The UK Brexit continues to dominate news headlines and will probably do so for some time to come.  We’re reluctant to comment on the current state of Brexit since negotiations seem to be in a continual state of flux, not to say acrimony.  At the present moment, the Irish border question remains unresolved and there are calls both for a second referendum on Brexit and a referendum on any deal agreed between MPs and the EU, so effectively we think all anyone can say is “watch this space”.  Similar comments apply to the UK property market where tax and legal changes have made life much more challenging for buy-to-let landlords.  It remains to be seen whether or not these changes will help tenants and those looking to buy for the first time - or whether they’ll simply result in a shortage of rental properties and fewer landlords. Europe While the official position is that Europe has a solid front in the Brexit negotiations, many of its key players are facing domestic challenges.  The German elections left it in political limbo for months and even now it’s an open question how long the grand coalition can survive, let alone how effective it will be.  France has seen extended strikes by rail and air workers.  There are signs that the government may have managed to get the upper hand with the national rail company, but that does not mean it will have a clear path for further reform, in fact, this may just be the start of its battles.  Italy’s elections also brought a coalition and have raised further questions about its relationship with the EU and some of the countries on Europe’s eastern border are in open rebellion with Brussels. The Americas In the U.S. President Trump continues to make headlines and divide opinions.  While his meeting with North Korean leader Kim Jong-un may have been more about publicity than action, his run-ins with China and the U.S. tech giants have to potential to influence the U.S. economy in a big way.  It remains to be seen whether the overall result in the U.S. will be positive or negative (or non-existent) but whatever happens, it could be a win for Canada and Latin America, both of which would probably be quite happy to step in and fill in any gaps left in the Chinese market by a lack of U.S. imports as well as any gaps left in the U.S. market by Chinese exports.  These (and other countries) would also probably be quite happy to offer a new home to the tech giants should they choose to move.  Attracting tech companies would require giving them access to skilled labour as well as practical resources, but a combination of work permits for staff willing to relocate from the U.S. or indeed other parts of the world, plus a decent pool of local workers could do the trick. Australasia China’s diplomatic spat with the U.S. could be good news for India, particularly its IT sector.  The U.S. has long had concerns about cyber attacks and the Pentagon recently drew up a “do not buy” which aimed to put a stop to software vendors using code which was created by developers based in China or Russia.  India, however, remains acceptable.

The Pensions Act 2008 laid the grounds for what we now know as auto enrolment and by this point in time it is essentially a fact of life for employers and employees.  As of the start of this tax year, however, the contributions framework has changed slightly and will change again as of April 2019.  This year the level of contributions raises from 2% or 3% of pensionable pay (depending on how pensionable pay is calculated) to 5% or 6% of which the employee will pay 2% or 3% and the employer 3%.  In 2019, contributions rise again to 7%, 8% or 9% of pensionable pay (again depending on how pensionable pay is calculated), with the employee paying 3% (of 7% or 8%) or 4% (of 9%) and the employer paying 4% (of 7%) or 5% (of 8% and 9%).  Here are some thoughts on what this could mean for employers and employees. For employers These increases have been on the cards for some time now, so hopefully you have already prepared for them financially, if not then you need to start incorporating them into your financial projections as quickly as possible.  When calculating your potential liability, remember to include “entitled employees” who do not have to be auto-enrolled but who may choose to join the pension scheme.  In some cases, you may be required to contribute to their pension savings. When considering your future financial plans, you may wish to take into consideration the possibility that the auto-enrolment scheme will be extended.  Obviously at this point, this is just a conjecture, however, there is no secret about the fact that politicians of all persuasions are keen to encourage pension savings and extended the auto-enrolment scheme could be seen as furthering that goal. You will also need to be prepared to deal with opt outs and people who have previously been enrolled but now wish to stop contributing.  Admittedly this has always been the case, however it is currently very much an open question as to what impact the increased level of contributions will have on people’s willingness to enter the scheme or to continue with it.  On the one hand, inertia can be a powerful force.  On the other hand, when money is tight people may well take the view that they need to prioritise making ends meet in the here and now before worrying about their retirement.  When people do opt out or stop making contributions, under current rules, they need to be re-enrolled after 3 years, unless they again actively choose to opt out. For employees Employees do not need to do anything, the increased contributions will simply be taken from your salary automatically, hence you only need to take action if you wish to opt out (if you are moving to a new job and have not yet been auto-enrolled into their scheme) or if you wish to cease making contributions.  You should be aware that, in the latter case, you will not only lose the benefit of the contributions you would have made yourself, but that you may also lose the benefit of your employer contributions.  Basically your employer is only obliged to make contributions if you do.  They may choose, voluntarily, to continue to make contributions into the scheme on your behalf, but they do not have to.  This means that, if you are finding money tight at the moment, then it would generally be highly advisable to look carefully at all options for improving your situation before you take a final decision on whether or not to opt out/cease contributions.  You do, however, have the option to do so if you conclude that this is in your best interests for the time being. For pension and investments advice we act as introducers only.

Some quiz shows allow contestants to “stop the clock” but in real life, time marches onwards relentlessly and therefore preparing for our later years should be high on the average person’s agenda.  Even if, at the present time, you do not envisage yourself having a traditional retirement, you might find it useful to consider the possibility that you might change your mind for whatever reason or that events might force you to give up work later in life even if you would have preferred to continue.  That being so, it could be wise to consider how you will finance your post-work years while you are still working. The state pension The simple truth about the state pension is that it depends entirely on political decisions.  Politicians can determine how much money you receive and at what age you can receive it.  They can change the level of national insurance contributions required to qualify for any given level of state pension, they could even choose to abolish altogether or to make it a means-tested benefit rather than one based on national insurance contributions.  Now, just because politicians can, in theory, do any or all of the above, does not mean that they will, however nor does it mean that they won’t.  Therefore, it could be considered a very wise precaution to take alternative steps to prepare for your retirement. Private pensions Many people in work will now have access to workplace pension schemes due to the auto-enrolment scheme launched in 2012.  The “carrot” to remain in these schemes (rather than opting out) is the fact that employers are obliged to make contributions into the employee’s pension pot.  Those not in paid employment can still contribute to private pensions and while they are obviously not going to benefit from employer contributions, they could still, potentially, benefit from tax relief in one way or another.  For example, the self-employed are not in paid employment but do still earn taxable income while home makers may not have an income of their own but could use a partner’s income to fund their own private pension and benefit from the tax relief on that.  For the sake of completeness, it should be mentioned that, in principle, there is nothing to stop people in paid employment opting out of their workplace pension scheme and funding their own private pension instead.  While this could mean that they would miss out on employer contributions (although their employer might offer to pay them voluntarily), it would put your in control of the level of contributions you made and if you felt unable to make the necessary level of contributions required by the current auto-enrollment scheme but want to save something on the grounds that it was better than nothing, then this could be an option. Other forms of retirement saving While pensions are synonymous with retirement saving, there are other ways of saving for retirement.  For example the (relatively) new Lifetime ISA (or LISA) was introduced for just that purpose (along with saving for a deposit).  While these may offer more flexibility than the pension saving in general and workplace pensions in particular, this flexibility can be a double-edged sword.  First of all, pensions savings benefit from tax relief and while the LISA does have a certain element of tax relief it works differently and may not be as beneficial, depending on your situation.  Secondly, pensions savings are ring-fenced, which, on the one hand means you can’t touch them, but it also means nobody else can touch them either or, to put it another way, they are ignored if you find yourself in a situation where you need or want to apply for means-tested benefits.  Savings held outside of a pension scheme, however, including in a LISA, might well need to be run down before you could claim such benefits. For pension and investments advice we act as introducers only.

While the UK does have systems in place for protecting those in need, those systems are not necessarily as effective as some people might wish.  Those in paid employment may have an enhanced level of protection via employee benefits, but might still benefit from taking out enhanced cover.  The self-employed either have to rely on the state or make their own arrangements.  With this in mind, here are five points you may wish to consider. Private medical and/or dental insurance can enhance the care you receive When you have private medical and/or dental insurance, you may well find yourself being treated at an NHS hospital by staff who work for the NHS, however you may also find that you have a vastly greater degree of control over when and where you are treated which may be extremely useful if you simply wish to be treated as quickly as possible so you can get back to work and keep earning an income. Income protection insurance can help you to pay your bills even when you cannot work The key difference between income protection insurance and payment protection insurance is that income protection insurance is essentially a replacement income and as such is yours to spend as you wish, whereas payment protection insurance is typically to ensure the repayment of specific debts, such as mortgages or other loans and can only be used for that purpose. Critical illness cover can be valuable even for those with no income Critical illness cover, as its name suggests, pays out if you are diagnosed with one (or more) or a range of critical illnesses.  Like income protection insurance, the money can be spent as you wish.  Unlike income protection insurance, however, critical illness cover can be a worthwhile purchase even for people who don’t have an income of their own, such as home makers.  The reason for this is that many people undertake activities which do have a financial value, even if they do not receive payment for them, or, to put it another way, if a home maker became too ill to act as a home maker then someone else would have to do what they do and unless you are extremely confident that your personal support network, such as family and friends, could provide all the help you need for as long as you need it, then you will need to employ someone else to undertake the tasks normally performed by the home maker and that person will, presumably, need to be paid. Life insurance can pay out before death as well as after If you are unfortunate enough to be diagnosed with a terminal illness, then you may be able to make a claim on your life insurance policy while you are still alive.  In any case, if you have dependents then having appropriate life cover in place may help to give them choices after your death, such as the choice as to whether or not to stay in the family home rather than to be forced to sell it to cover an inheritance tax bill. A cash cushion can help to cover shorter-term needs Hopefully, you will get through life without ever having to call on any of the insurance policies mentioned above, in fact, hopefully you will get through life without experiencing any serious upsets.  It is, however, probably too much to hope that you will get through life without any short-term emergencies of some sort, which is when having some cash savings can come in very useful.  These cash deposits may not generate great returns, so it’s important to strike the right balance between having funds readily available and growing your money through investment.  Professional advice may help with this.

Insurance, rather like the NHS, is something you pay for so that it’s there if you need it, even though you probably sincerely hope that you don’t.  Nevertheless, every year, indeed, every day, people use the NHS for things they hoped would never happen to them, from freak accidents to serious illnesses and every day people claim on insurance policies for things they hoped would never happen to them - but they did. Insurance, employment and self employment National Insurance may be paid by both the employed and the self-employed and in addition to funding social services such as the NHS, it also funds or helps to fund, some forms of social assistance to those in need, such as those with serious illnesses or disabilities, however, the funds on offer may not be sufficient to meet what you consider to be your needs, let alone your wants.  Those in employment may get a higher level of cover through their employer and it never hurts to check, particularly since doing so may reveal that, again, the level of cover is less than you would need, let alone less than you would like.  The self-employed will not even have the safety net of employment cover and hence need to make it a priority to ensure that they have sufficient cover in place for any misfortune which might befall them, no matter how unlikely it is. Protect your health and protect your wealth Do you really want to find yourself in a situation when you are forced to choose between devoting all your energy to recovering your health or keeping working to pay the bills, knowing that, as a minimum, it will slow your recovery?  If the answer to that question is “no”, then you should make it a priority to have the necessary insurance cover in place.  For example, income protection cover, does exactly what its name says and can pay out in a variety of situations, while critical illness cover is likewise self-explanatory and can pay out if you are diagnosed with one of a range of critical conditions.  You may also want to look at medical and dental insurance to give yourself an enhanced range of options should you fall ill, for example, you may be able to get treatment in a shorter time and/or at a hospital which is more convenient for you.  You may also find your insurer pays for treatments which are recommended by the NHS but not necessarily funded by them, like extra physiotherapy to help you recover from an accident. Consider the broader aspects of protecting your livelihood Even if you are in employment and have reached a stage where you have maximum employment rights, unless you are in an exceptionally safe situation, you have to be aware of the fact that redundancy is another fact of life which most people hope won’t happen to them but in most cases can.  If you are self-employed then you have even less security.  That being so, it can be very worthwhile to keep looking actively at ways to ensure you continually develop and maintain skills which are in demand in an ever-changing job market.  You may find that there is a financial cost associated with this and if this is the case, you would need to factor it in amongst  your other financial goals.  If you are self-employed you might also wish to look at having a back-up plan for if you are unable to work for any length of time, be it short of long, so you can, for example, outsource your work to someone who can deliver the quality your clients expect and, hence, continue your professional relationship with them.

Moving home may be something which gets easier with practice, for example, if you’re in the military and have to change homes a lot.  It is, however, probably not something many people would class as a whole bundle of fun and in some cases can be the cause of a lot of frustration and stress.  In addition to all the clearing out and packing and unpacking, there’s all the organising and updating and changing your address with all the relevant people and organisations.  It’s entirely understandable why people might feel tempted to put home insurance on their list of things they just want to get out of the way as quickly as possible.  The key point, however, is to go about this the right way, so you have all the cover you need for as long as you need it. When you buy a new home you are legally responsible for it from the point of exchange Once contracts are exchanged they are legally binding.  This means that when you buy a new home you become legally responsible for the building itself right from that point, even if other people are still living in it.  Therefore, if at all possible, you almost certainly want your house insurance for your new home to start on the day of exchange rather than on the day on which you move in.  Depending on your situation, this may mean arranging “double cover” for a while.  For example, if you exchange on your new home before you have sold your old one, then you will need cover for both properties until you exchange the property you are selling, at which point it becomes the buyer’s responsibility.  The good news is that you are probably only going to need double cover for the properties themselves since you will presumably have all your property and personal items in your main home and hence only need home contents insurance for that property. It’s important to understand your transit cover (if any) Your home contents insurance may offer some cover for goods in transit, for example, during a home move.  This protection may, however, be dependent on you using a professional removal company.  If you choose to move your belongings yourself, then you may wish to look at getting protection from another source.  If, on the other hand, you find your home insurance does not cover you for transit, but you were planning on using a professional removal company anyway, then you may find that they have their own insurance.  On a side note, similar comments apply if you need to put any of your belongings in storage.  Your home insurance may cover it but you would be wise to double check exactly what they cover, for how long and under what conditions. Use a move as an opportunity to update your home contents cover When you move, by definition you pack up everything you own (or at least everything you decide you want to take with you), which gives you the perfect opportunity to double-check that you have the right level of home contents cover in place.  Remember this can work both ways.  If you’ve recently invested in some expensive purchases, then you really need to make sure that you have insurance cover in place for them and that you’ve met all the conditions for cover (for example you may be required to list some items individually).  On the other hand, if you’ve had a declutter and have moved on a number of your former possessions, then you may find that you actually have more insurance cover than you need and can reduce it, possibly saving yourself some money. For building and contents insurance we act as introducers only.

You can buy just about anything on eBay, including a house.  Perhaps in the future, eBay will become a core marketplace for real estate in the same way as it has essentially become a core marketplace for pretty much everything else.  After all, auctions are already a recognised means of buying property in the UK, although at this point they process a relatively small percentage of transactions.  This, however, may change, as technology develops. The practicalities of buying a house The process of buying a house can be divided into three, broad stages: finding the right house, arranging financing and going through the purchase process.  To understand why so few houses are currently sold through auction, and why this might change in the future, it’s worth taking a look at each of these steps. Finding the right house First of all you have to choose where in the country you want to live and then you have to choose the particular house in which you want to live.  Then, you have to double-check that your initial assessment was correct.  In other words, you need to check not only that your judgement of the house’s physical condition was accurate, but you will also need to assess the house’s legal situation and, in particular, whether you may find yourself liable for further costs related to the property, such as ground rent on a leasehold property, or the costs of maintenance of a boundary for which you would be held legally responsible.  You might also wish to look into the general costs of running a property, in particular, insurance, part of the cost of which depends on the location of the property.  Thanks to the internet, more and more of this research can be done remotely, which, of course, benefits channels which are focused on remote sales.  It also benefits channels such as traditional auction houses, which rely on speed, since it makes it easier for prospective buyers to undertake their due diligence in the time between a house being listed as going to auction and the start of the auction itself. Arranging financing The fact that many home buyers require mortgages may be the single, biggest reason why home auctions are still a fairly niche way of buying property.  An auction contract is legally binding from the point of sale and, generally, buyers have to be ready to put down a deposit immediately and pay the rest within the specified term.  If they are unable to do so, then they are in breach of contract and may find themselves facing penalties for this.  Buyers who require financing would therefore either have to take the risk of applying for a mortgage after they have agreed to buy the property or agree a mortgage in principle before attending the auction.  Typically, however, mortgage lenders want some form of building survey undertaken before agreeing to lend money on a property and the cost of this would fall on the potential purchaser even though at that point, there would be no guarantee that they would actually be able to buy the house. The purchase process In terms of the actual mechanics of buying a house, there’s a fairly strong case for arguing that the auction process is simpler than sales through an estate agent.  A price is agreed, the gavel comes down and that’s an end to the matter.  Buyers have no fear of being gazumped in a seller’s market, sellers have no fear of being gazundered in a buyer’s market.  Chains are irrelevant so there’s no fear of a sale falling through because of one weak link in it.  Buyers simply have to remember to focus on fundamentals and not allow themselves to get carried away by “auction fever”. Your property may be repossessed if you do not keep up repayments on your mortgage.

As you go about your daily life, heading to work, to the shops, to your leisure activities, walking the dog, some parts of the world may seem very remote to you.  In fact, regardless of where you live, somewhere in the world is, literally, on the other side of the planet to you.  At the same time, we all share the same planet and so events which take place literally on the other side of the world can still have an impact on our lives.  With this in mind and following Trump's visit, here’s a quick round up of what’s going on in the UK and elsewhere. The UK Brexit continues to dominate the headlines, with issues relating to Northern Ireland frequently being mentioned.  It’s probably a safe bet that Brexit will continue to be major news both economically and socially, at least up until the terms of the UK’s withdrawal from the EU are agreed and quite possibly long after, while its impact is felt. Europe Brexit will have an impact on Europe too and there are other signs of interesting times on the continent.  Germany recently struggled to form a government and it remains to be seen how effective that government will be over the longer term.  At the present moment, Italy is still trying to form a government even though its last general election was two months ago.  France has been hit by strikes, which could potentially be seriously detrimental to the country’s economy if they continue into peak tourist season.  Spain is still dealing with a restive Catalonia and the EU is openly at loggerheads with some of its Eastern members, particularly Hungary.  It would be harsh to say that all is doom and gloom on the continent but it would arguably be very fair to say that life and economics on the continent of Europe is far from being a bed of roses. The Americas Starting from the North, Canada has finally managed to agree a trade deal with the EU, which may (or may not) be seen as a blueprint for a future deal with the UK. November 2018 sees the U.S. midterm elections in which all 435 seats in the United States House of Representatives and 35 of the 100 seats in the United States Senate will be up for the taking.  Expect a hard-fought battle as both sides vie for control of Congress. Mexico, Central America and South America all continue on their various paths, some showing more economic strength than others.  Mexico and Brazil both have elections later this year, which could significantly influence the region’s economic path. Asia Asia is home to three of the world’s largest countries, the Russian Federation (a fair part of which is in Asia), India and China, along with Japan, which is still an economic force and up-and-coming economies such as South Korea, Vietnam and the Philippines.  Several Asian countries are due to have elections in 2018 and more in 2019 so it will be interesting to see how events develop there.  On the plus side, there have been encouraging signs between North and South Korea. The Middle East and Africa Geographically speaking, this is a huge region with a very diverse range of economies in very different states of development.  At present time, there is a great deal of interest in Saudi Arabia, which is working hard to reduce its dependence on oil revenues by developing alternatives, such as tourism.  It has initiated three major new projects, Qiddiya, Neom and the Red Sea in an attempt to stimulate and broaden its economy.  Having said that, it is very much an open question as to whether it will be able to match the tourist appeal of the nearby UAE.

It is harsh but probably true to say that where there is a person who has money, there is very likely to be someone out there who wants to part them from it.  When an older person has the sort of money likely to be found in a pension pot then they can find themselves a very tempting target for scammers, all the more so since pensions freedoms were introduced and gave pensioners a wider range of choices about what to do with their hard-earned savings.  That means those with pension pots really need to stay alert to the possibility of scams in order to protect themselves. Start by cleaning up your digital life Over the years, you’ve probably left quite a trail of digital breadcrumbs all across the internet and it’s a good idea to do a regular clean up, as a minimum once a year.  Think of every online account you have as a window into your life, the fewer windows you have, the fewer windows you have to secure.  In other words, only keep accounts open if you actually use them, if you don’t, actually close them instead of just leaving them hanging around.  Then focus on the security of the accounts you have left, for example by creating strong passwords for them. Keep all your devices secure All your internet-connected devices need security protection.  This includes your smartphone and tablet, you can and should download anti-virus software for them and setting up a PIN and/or biometric identification on your mobile devices is definitely worth considering.  Just remember, while biometrics may be convenient, you need to touch your bare skin against the reader, whereas PINs can be entered with a special stylus or even “smart gloves”. Stay on top of physical data security By this point in time, you’re probably familiar with the practicalities of securing your home and car against the theft of physical items and these standard precautions will also help to protect your data.  At this point in time, however, you need to take these precautions a step further and start working to protect anything which relates to your personal data, so, for example, look at your mail and think about whether or not it needs to be shredded before being recycled.  If you buy a shredder, make sure it is one which can cross-cut (i.e. cuts horizontally and vertically) and if you don’t get enough mail to justify keeping a shredder, then scissors are fine as long as you cut the paper cross-ways and into small pieces. Be wary of unusual and/or unexpected phone calls On the phone we only have a person’s voice to guide us as to whether their intentions are good, bad or indifferent and we can feel, or be placed, under pressure to respond quickly.  Treat unknown callers with caution, even if they claim to be from an organisation you recognise such as your bank (which will have no need for you to confirm extensive personal details before speaking to you, just standard security questions) and do not let yourself be rushed into making hasty decisions.  As a final point, remember that if you hear a lengthy pause between you picking up the phone and a human speaking, it’s a massive pointer to you having been auto-dialled. Remember the golden rule, if it sounds too good to be true it probably is These days, the corollary to that old saying, is that if it sounds too bad to be true, it probably isn’t.  Some scams play on a desire to make money, but some play on fear of losing it or on fear of something happening to someone you love if you don’t give the fraudster your money. For pension and investments advice we act as introducers only.

Last year, the Bank of England’s decision to raise interest rates took the Monetary Policy Committee out of the financial pages and into the mainstream headlines.  Given that the raise took interest rates from 0.25% to 0.5%, it was hardly the sort of change to make savers jump for joy, but it was a warning flag for borrowers to make sure that they were on the best deal for their situation, or, more accurately, that their situation could be about to change and that they might need to be ready to adapt to that. From ultra-low rates and quantitative easing to…? From July 2007 to November 2017, the only way was down for UK interest rates.  The steepest drop came in the wake of the 2008 financial crisis, which saw interest rates plummet from just over 5% to 0.5% where they stayed until August 2016, when they were cut to 0.25% during the aftermath of the Brexit vote.  In short, therefore, last year’s rate rise has simply brought interest rates back to where they had been for near enough the past 10 years and nowhere remotely close to the levels seen before the 2008 financial crisis, let alone the sort of levels seen in parts of the 1970s and 1980s.  On the other hand, the fact that the Bank of England did raise interest rates was a reminder that it could and while interest rates have a natural floor (at 0% although, in theory at least, negative interest rates are a possibility and have been used in other countries), but positive interest rates can be raised indefinitely (again, in theory at least).  It all depends on the UK’s economic performance as measured through inflation. Interest rates and inflation The Bank of England (specifically its Monetary Policy Committee) is charged with keeping inflation at precisely 2%, however, it is accepted that inflation may move up to 1% in either direction.  If inflation goes below 1% or above 3%, the Bank of England is required to write an open letter to the Chancellor to explain why and what it intends to do about it.  The question, therefore, is less “what will the Bank of England decide to do” but “what will economic circumstances oblige the Bank of England to do”?  If inflation drops below 1% the Bank of England can opt to lower interest rates again and/or to use quantitative easing, however if it goes above 3% then it is difficult to see how the Bank of England can avoid raising interest rates, however this does not necessarily mean that mortgage-holders should take this as a sign to switch to a fixed-rate deal as soon as possible. Fixed rates can come at a price The first point to remember is that there will probably be some degree of cost involved in making any change to your current mortgage arrangements.  It is, therefore, important to do your sums carefully and make sure that the up-front costs are outweighed by the longer-term savings.  The second point to remember is that fixed-rate mortgages are, essentially, a means of “going long” on interest rates and locking in a deal at lower rates in the expectation that they will rise in future.  Lenders, however, will take into account the possibility of future interest-rate rises when they price the deals they offer and, as commercial organisations, accountable to their shareholders, they will aim to ensure that they turn in a profit even if interest rates go up.  Hence fixed-rate deals may not necessarily work out to be the cheapest option or at least not by much.  What they do offer, however, is certainty, since they ensure that mortgage repayments remain the same from one month to the next over the term of the fixed-rate deal and some people may find this certainty worth the money. Your home may be repossessed if you do not keep up repayments on your mortgage.

You only actually own a property outright if you buy it on a freehold basis (or buy a share of the freehold), in which case your money pays for the property and the ground on which it stands (and sometimes the ground around it).  If you buy a leasehold property then you simply buy the right to use that property for the term of the lease, you do not own it or the ground under it. The modern history of leasehold If we take modern history as being from the 20th century, then the modern history of leaseholding arguably starts in the 1920s when the UK was in a process of recovery from WWI and was already starting to see population growth.  Selling property on a leasehold basis was a win for landowners as it allowed them to earn what was largely a passive income from their land while still maintaining ownership of it.  The transition to the mid-20th century was marked by World War Two, after which there was a rush to construct new homes partly to replace those lost to bombing and partly to accommodate massive population growth.  These new homes were a mixture of houses and flats.  As a rule of thumb, the former were sold on a freehold basis and the latter on a leasehold basis as it allowed them to be managed centrally. The first, modern, leasehold scandal Modern leasehold hit the headlines back in the 1960s when it was discovered that (by then) elderly leaseholders were facing eviction as their leaseholds came to an end.  That could have been an opportunity for the government of the time to step in and put a stop to the practice of allowing property to be sold on a leasehold basis but it did not and not only did the leaseholding system continue, it began to be extended to houses as well as flats.  Periodically, issues with it have made newspaper headlines, sometimes causing governments to take some kind of action, such as to introduce the Leasehold and Commonhold Reform Act 2002, but fundamentally the leasehold juggernaut has continued rolling on, until now. The housing market and housing ministers Perhaps the main reason why nothing much has been done about the leasehold system is that the UK has had a total of 16 housing ministers in the last 20 years, of whom the longest-serving has been Labour’s Yvette Cooper, who lasted a grand total of 32 months and the shortest-serving was Alok Sharma, who lasted a mere 7 months.  With such a rapid turnover of ministers, it is, perhaps, hardly surprising that nobody has got around to dealing with the thorny issue of leaseholds, particularly since there are two sides to every story and both have to be managed. Leaseholds from a developer’s perspective Building new housing requires a lot of up-front investment and even though the UK has strong demand for housing, houses have to be priced realistically to sell.  What is more, getting planning permission for a new development may depend on a percentage of the houses built being sold as “affordable housing”, the cost of which has to be met in some other way. The reality for buyers In short, while it may well come about that the leasehold system is abolished at some point in the future, at the present time it is a reality, buyers have to understand.  That being so, it is strongly recommended that buyers take professional legal and financial advice before purchasing any property, particularly a leasehold property, so that they fully understand both the costs and legal implications of the contract, for example any restrictions on what they can do with their new home. Your home may be repossessed if you do not keep up repayments on your mortgage.