HAPPY NEW YEAR! Not according to early indicators for the financial world in 2016.
It looks like more of the same. The first day of trading in January began with yet another major drop in share prices in China, and that poor start reverberated around the great financial centres.
We are approaching eight years since the financial crisis of 2008, but many experts are convinced that we are not out of the woods yet.
Property-owners apart, deciding exactly where to put your money to save or invest is no simple matter, especially when government legislation keepings moving the goalposts (especially for landlords and, in the next budget, those saving for pensions).
It’s a busy time for Independent Financial Advisers (IFAs), and there’s no silver bullet or special crystal ball, even for them, when it comes to predicting the financial future.
It’s a time for common sense, and caution, and probably reducing your overall indebtedness, as long as it doesn’t impact too heavily on your well-being and lifestyle.
One crucial change in the facts of financial life from the start of this year is that the amount guaranteed to depositors if a bank or building society goes “bust” has been reduced from £85,000 to £75,000.
That 85K guarantee was brought in by the European Union in 2010 and the figure of €100,000 has not actually changed. It is just that the value of 100,000 Euros has fallen against the pound, hence the £10,000 reduction.
Couples with joint accounts each receive that £75,000 protection, provided both are named on the account.
This banking guarantee was brought in following the collapse of Northern Rock in 2007. Many will have forgotten that prior to that only the first £2,000 was guaranteed, as well as the 90% of the next £30,000.
The Labour government tried to stem the run on Northern Rock by raising the guarantee to £35,000, but it was too little and too late to save the bank. It was raised to £50,000 in 2008 and then £85,000 two years later when the guarantee became part of EU policy.
It is not widely known that banks and building societies will guarantee larger sums for short periods.
“Depositors with temporary high balances will be covered up to £1m for six months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later,”state the Bank of England.
“This is to ensure that depositors are protected when they deposit funds over the limit as a result of specified events, including following a house sale or funds received from a ’life event’ such as a divorce settlement or inheritance, for a period of time until they have sufficient time to spread the risk between institutions to appropriately protect these funds.”
The chancellor’s proposed “buy-to-let” changes could see around half a million properties come onto the market as landlords decide to cut and run.
The first survey of landlords since those changes, included the additional 3% stamp duty change that starts in April, by the Residential Landlords Association (RLA) also led to predictions that rents will rise for millions of tenants.
The survey found that one in ten landlords plan to quit as figures show they will lose £2 billion in tax reliefs by 2020. The RLA believes that even more properties could come on to the market as a quarter of the landlords contacted thought they might sell some of their buy-to-let portfolio.
A spokesman for Capital Economics claimed: “Half a million properties is about six months of transactions; that many properties dropping onto the market in a short period of time would change market dynamics dramatically, moving the power back into the hands of the buyer and forcing house inflation downwards.
“A more likely scenario is that landlords will drip feed properties on to the market over a period of time, but eight to ten thousand extra properties coming onto the market every month would still dampen further house price growth by helping restore the balance between buyer and seller.”
The Royal Institution of Chartered Surveyors (RICS) has predicted an average house price growth of 4.7% per annum for the next five years.
A senior Tory peer, Lord Flight, believes George Osborne’s buy-to-let changes could trigger a property crash, especially if landlords suddenly dump hundreds of thousands of properties on the market.
Flight, who served as a shadow chief secretary to the Treasury, insists Osborne’s stated intention “clearly has the ability to create a sharp fall in prices, if not a crash. I hope the government will rethink its sudden attack on buy to let (last) summer and autumn.”
The National Landlords Association (NLA), after studying the reduction in buy-to-let tax relief, believes that rents will increase by £29 and £113 a month. London, as ever, will see the biggest increase. Rents there on average are currently £1,134 a month and the NLA estimates a 10% increase in rent will be needed to cancel out that loss of tax relief.
Most expect Osborne’s new vision for pension saving to grab the headlines in the next budget – confirmed for Wednesday 16 March. But landlords will be keenly listening for any relief from a chancellor who gave them plenty of bad news in 2015!
For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail info@wwfp.net or take a look at our websitewww.wwfp.net.
The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage.
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