Tag: Investments

Categories

where did house prices increase and decrease the fastest in the UK in 2017?

Research into the housing market throughout 2017 has revealed the areas of the UK where property prices increased and decreased the most last year. Cheltenham in Gloucestershire was the place where prices grew at the fastest pace, with the average price of £313,150 marking a 13% rise – nearly five times the UK average increase of 2.7%. At the other end of the scale was the Scottish town of Perth, where prices dropped by 5.3% to make the average property price tag £180,687.

The places which saw the biggest growth were in southern England, with Bournemouth and Brighton coming in second and third place with rises of 11.7% and 11.4% respectively. At the other end of the scale, Scotland, Yorkshire and the Humber were the areas where the biggest falls were seen. The second-biggest fall in house prices was seen in Stoke-on-Trent (4%), with Paisley in third position (3.6%).

Fifteen out of the top twenty areas for house price increases are located in London and southern England. This is in spite of the capital overall seeing its average house price fall by 0.5%, thanks to the economy slowing down and consumers continuing to feel the effects following the Brexit vote of 2016.

The outlook for the year ahead offers little reprieve: many in the property sector, including the Royal Institution of Chartered Surveyors, predict that the market in 2018 will, for the most part, remain flat, with some expecting property price growth to slow even further. Whilst this would be good news for those looking to take their first steps onto the property ladder, it’s more worrying news for people hoping to invest in the market.

It’s expected that the story will differ geographically, but property portal Rightmove has also predicted that different property types are likely to grow at different rates. They have forecast prices for homes with two bedrooms or fewer will rise by 3%, whilst three and four bedroom homes will see growth of only 2%.
Sources
http://www.bbc.co.uk/news/business-42539137
http://www.independent.co.uk/news/business/news/uk-house-price-increases-biggest-2017-cheltenham-bournemouth-brighton-london-housing-market-david-a8137366.html
http://www.bbc.co.uk/news/business-42555351

one for the kids? – if they’re saving for a home,check they’re making the most of the lifetime ISA

If you’re saving for a home through a Help To Buy ISA or know someone who is, it’s worth being aware of a planning opportunity which could boost your savings by an additional £1,100. But anyone hoping to take advantage of this opportunity needs to be quick, as it will only be available for just under four months more.

Any savings in a Help To Buy ISA which are transferred to the new Lifetime ISA before 5th April 2018 will benefit from a top up of 25% from the government. The opportunity has arisen thanks to the Help To Buy ISA small print relating to the transfer of money saved before the launch of the Lifetime ISA on 6th April 2017.

Lifetime ISAs have an annual limit of £4,000, which includes money transferred from another savings account. However, money transferred from a Help To Buy ISA within the first twelve months of Lifetime ISAs becoming available does not count towards the contribution limit for the 2017-2018 tax year. As such, any money transferred into the Lifetime ISA from the Help To Buy ISA will be boosted by the government top-up, potentially resulting in hundreds of pounds being added to your savings.

For example, someone who had saved the £4,400 maximum amount into a Help To Buy ISA before April 2017 could transfer this into a Lifetime ISA before 5th April 2018. As this wouldn’t contribute to their limit, they could then save a further £4,000 into the Lifetime ISA for a total of £8,400. The 25% bonus would then be added to the entire £8,400 in April next year, giving an additional £2,100. In any other year, the maximum top-up which could be earned from the Lifetime ISA would be £1,000.

So If you know anyone using a Help To Buy ISA to save towards a first home, transferring money to a Lifetime ISA to enjoy an additional top-up of up to £1,100 in April next year could make collecting the keys to their own place happen a little bit sooner.

Sources
http://www.telegraph.co.uk/personal-banking/savings/use-isa-loophole-now-1100-savings-boost/

what does the first interest rate rise in ten years mean for you?

After months of speculation, the Bank of England finally raised interest rates in the UK for the first time in over a decade. The increase from 0.25% to 0.5% might seem small, especially when you consider that the last time the interest rate was increased in July 2007 it was up to 5.75%, but the fact that interest rates are going up at all after more than ten years at rock bottom is significant.

The rates rise will have an impact on the finances of millions of people in the UK, with those on variable rate mortgages likely to lose out the most. 46% of households with a mortgage are on either a standard variable or tracker rate, which are likely to move at the same time as the official bank rate.

These mortgages have an average of £89,000 left to pay off, resulting in a monthly payment increase of around £12. Those with higher variable rate mortgages will of course see their outgoings increase by a higher amount: payments on a £300,000 mortgage will go up by about £39 a month. Homeowners with fixed rate mortgages meanwhile can expect their payments to remain the same for some time following the interest rate lift, as can those with loans and credit cards to pay off.

Savers are likely to benefit from the rates increase having seen little growth on their savings for a number of years. On average, an easy-access savings account currently pays interest at 0.14% annually, meaning that £10,000 worth of savings would generate just £14 every year. If providers choose to pass on the rates rise in full, this will add another £25 to earn £39 annually. A typical ISA meanwhile will see the annual growth of £10,000 increase from £30 to £55.

Pensioners who have purchased an annuity can also expect to benefit from the rates rise. Annuities follow the yields on gilts, or long-dated government bonds. In anticipation of a rates rise, these have also increased, meaning those purchasing an annuity for retirement will receive better value for money on their investment. In November 2016, a joint annuity bought for £100,000 would receive an annual income of £4,086. That figure has risen this month to £4,468 and could continue to go up depending on how likely further base rate increases are – something which the Governor of the Bank of England, Mark Carney, has indicated is likely over the next few years.

Sources
http://www.bbc.co.uk/news/business-41846330
http://www.bbc.co.uk/news/business-41831777
http://www.telegraph.co.uk/money/special-reports/will-happen-investments-interest-rates-rise/

what impact will the election period have on my pension and ISAs?

The market reaction to Theresa May’s decision to call a snap general election to take place on 8th June was, thankfully, relatively minor. After reaching a record high in March 2017, the FTSE 100 dropped by 3% following the Prime Minister’s surprise announcement last month. Compared to the negative reactions experienced following both the 2012 eurozone crisis and the Chinese economy concerns at the start of 2016, this was reasonably slight.

Whilst the election period brings uncertainty, almost every general election in the last two decades has not caused the FTSE 100 to become more volatile in the weeks either side of election day. It’s therefore more than likely that the markets will continue without any major disruption, even if a new government comes into power. It’s usually only genuinely unexpected results which cause markets to rise or fall considerably, with the most recent example being the referendum vote for Brexit last year.

There are, however, still things you can do to minimise any impact of the election on your pension pot or savings accounts.

A well-diversified investment portfolio – a mixture of bonds, shares, property and cash across different sectors and countries – means you’ll be spreading risk and making it more likely that a rise in one sector will soften the blow of a fall in another. It’s likely that you’ll have a particular outcome in mind for your investments, whether that’s securing your retirement in the future or reaching a particular financial goal by a certain time, so sticking to this is the right thing to do rather than becoming distracted by any short-term ups and downs in the markets.

Look out for any investment perks that are brought in soon after the election result as in order to raise revenue, most new governments will introduce policies to help you grow your finances. Don’t forget about the benefits already available to you either, such as ISA and pension allowances, as these can also be a good way to protect your savings from any market volatility. Lastly, drip feeding your investments month by month can be a good way to combat uncertain markets – you might not capitalise fully on a market high, but you’ll avoid losing out during any sudden lows.

Sources:
http://www.which.co.uk/news/2017/04/how-will-the-general-election-affect-my-pensions-and-isa/

what are asset classes

An asset class is a broad group of investments that have similar financial characteristics.  Traditionally, there are four main asset classes:
Cash
Shares
Property
Fixed-interest securities (also called bonds)

At its simplest, an asset class can be defined as a broad type of investment. The video below should help to explain it in visual terms.

Sources:
ClientsFirst
https://www.moneyadviceservice.org.uk/en/articles/asset-classes-explained

is buy-to-let no longer such a good deal?

It wasn’t all that long ago that investment in buy-to-let property was seen as a straightforward way to generate an income for yourself. However, recent changes made by the government mean that turning a profit through buy-to-let in today’s property market is set to become much more difficult. Each case is individual, and the profitability of a property isn’t as simple as looking at the price of the property and the amount of rent it generates each month, but for many, buy-to-let will soon no longer be the attractive investment opportunity it once was. So what has changed?

From the start of April 2017, the amount of tax relief that can be claimed by a landlord on the interest on their buy-to-let mortgage has fallen. Higher rate taxpayers used to be able to offset all of their mortgage interest against their rental income before they calculated how much tax they owed, but this year they will only be able to offset 75% of the interest. This percentage is then set to reduce again to 50% in 2018 and 25% in 2019. No interest at all will be eligible to be offset in 2020, with a 20% tax credit being introduced instead.

Not only does this mean that investors are set to face growing tax bills over the next few years, even if their income has not increased, but it also means that some taxpayers currently on the basic rate will be pushed into the higher rate tax bracket when their rental income is taken into account. It will also have an impact on means-tested benefits, with some set to lose out on these through the new system.

For existing landlords, there are options to soften the blow of the new tax arrangements. Some buy-to-let owners, particularly those in the priciest areas of the country, such as London, are selling their properties in order to reinvest in multiple properties elsewhere. As companies are not subject to the new tax laws, purchasing these properties through a company will prove to be a better choice financially even taking into account potential capital gains tax.

As residential mortgages are usually at a lower rate than buy-to-let mortgages, another option for landlords is to remortgage their main residence and use the money raised to reduce their buy-to-let mortgage. A buy-to-let offset mortgage is also possible, although this option will only be open to those who meet the eligibility criteria. However, the option that around two thirds of landlords have said they plan to go for is raising rent, with the average increase expected to be between 20% and 30%.

Sources
http://www.thisismoney.co.uk/money/buytolet/article-4313456/Where-invest-buy-let-yield-beat-tax-hike.html
http://www.telegraph.co.uk/investing/buy-to-let/new-buy-to-let-tax-works-andhow-beat/

the humble £1 coin 24 years on – what it could have made you

Tuesday 28th March 2017 saw the Royal Mint release 300 million new £1 coins. The updated design is dodecagonal (that’s the fancy word for twelve-sided), bimetallic like the £2 coin and, perhaps most importantly, impossible to fake according to the Mint, thanks to a closely guarded security feature.

The old £1 coin will remain in circulation until Sunday 15th October, when it will be consigned to history along with the many other obsolete forms of UK currency that have gone before it. The round pound has been with us since 1983 when it was introduced to replace the £1 note. But what could one of the first pound coins have made you in the twenty four years since they were first introduced?

Imagine that £1 coin had been left in a drawer, a piggy bank or (perhaps most likely of all) slipped down the back of a sofa in 1983 and done nothing since then. Inflation up to 2017 would mean that the £1 would have had its buying power weakened by approximately 32p.

Had the £1 been invested in gold or in a cash savings account, the return would be healthier, but nothing to write home about, delivering a real value of £1.05 and £1.33 respectively by the end of 2016. Putting the £1 into UK residential property would have seen its real value at the end of 2016 rise to £2.42 – although this calculation doesn’t assume monthly reinvestment, which makes it difficult to compare to other forms of investment calculated.

Investment in shares would have done a lot better. Had the £1 been invested and tracked the rise in the FTSE all-share index, by the end of 2016 and after allowing for inflation, its value would have risen to £11.66, assuming that any income would have been reinvested every month to make the most of compounding over time.

The above calculations offer a neat reminder of both the corrosion to value caused by inflation and of the potential rewards of investment. Whilst investing will always include an element of risk, if you’re in a position to do so then an investment is the best way to help your money grow. It’s not all about return, but doing nothing with your savings means they’re almost certainly going to be losing value over time.

So when you get your hands on one of the new £1 coins, think about what it could be worth twenty four years from now and what you need to do to make sure it works hardest for you.

Sources
http://www.bbc.co.uk/news/business-39306247

ernie to get slimmer

Premium bonds celebrated their 60th anniversary last year; whilst they’ve remained popular throughout that time, it’s not hard to see that what they offer is closer to a lottery ticket than a viable investment opportunity. The chances of winning the jackpot is 26 million to one, and as all the interest generated in money invested goes to the prize fund you won’t see any return on your investment unless you’re one of the lucky few to bag a top prize.

However, they’re set to become even less attractive later this year, when the chances of winning the bigger prizes will become slimmer still. National Savings and Investments (NS&I) has announced that from May 2017, the estimated number of tax-free £100,000 prizes will fall from three per month to just two. The £25,000 prizes will also be reduced, going from eleven to nine each month. The amount of monthly £10,000, £5,000 and £1,000 prizes is also set to go down with the total prize fund shrinking from £69.5 million to £63.8 million.

The reductions are due to NS&I making cuts across a range of saving products to reflect market conditions. Direct ISA and Direct Saver accounts will see interest rates cut from 1% to 0.75% and 0.8% to 0.7% respectively at the same time.

Whilst a drop in the number of big prizes is undoubtedly a disappointment for savers, the changes do little to change the positives and negatives of premium bonds overall. As an investment opportunity they offer no guarantees but the fact that any money put in is backed by the treasury means your investment is fully protected.

It’s not all doom and gloom for NS&I products, however. Last November, Chancellor Philip Hammond announced a new savings bond would become available in spring 2017, offering what was described as a “market-leading” rate of approximately 2.2%. The precise rate is set to be confirmed soon, and the three-year bond will be available for anyone over 16, allowing them to invest up to £3,000.

Sources
http://www.bbc.co.uk/news/business-38893452

Number crunching by Her Majesty’s Revenue and Customs (HMRC) provides for us overall figures for 2010/2011 key out-turns for taxpayers and income tax liabilities. In terms of an analysis of the body of taxpayers, we are told that:

  • there were 31.3 million individual income taxpayers in 2010/2011, an increase of 0.7 million compared with the previous year.
  • there were 28 million non-higher rate taxpayers (89.6% of all taxpayers), 3.02 million higher rate taxpayers (9.6%), and 236,000 additional rate taxpayers (0.8%).

The average rates of taxation applied to taxpayers in 2010/2011 were 12.5% for basic rate taxpayers, 23.1% for higher rate taxpayers, and 39.9% for additional rate taxpayers.

The share by band of total income and tax liabilities were:

  • the richest 50% of taxpayers by total income accounted for a 76.5% share of total income and 88.7% of tax liabilities.
  • the richest 1% of taxpayers by total income accounted for a 11.5% share of total income and 25.0% of tax liabilities.

In terms of tax liabilities due on taxable incomes, 61.3% fell within the basic rate tax band, 23.9% in the higher rate band, and 14.7% in the additional rate band.

The HMRC projections for 2013/2014 estimate that there are:

  • 29.3 million taxpayers in 2013/2014, which is 2 million lower than in 2010/2011.
  • 4.3 million higher rate taxpayers in 2013/2014, which is 1.3 million higher than in 2010/2011, with 290,000 additional rate taxpayers in 2013/2014.

Also in 2013/2014 average rates of tax fall to 10.6% for basic rate taxpayers, 22% for higher rate taxpayers, and 38.8% for additional rate taxpayers. HMRC notes that recent out-turns and projections for the highest income taxpayers are strongly affected by expected responses to changes in the top rate of income tax.


Sources: www.hmrc.gov.uk

 

building your financial future

Financial planning in your twenties, thirties and forties …

This is the first of two articles where we look at ‘financial planning through the decades:’ how your financial planning needs change through the various stages of your life.

Clearly the average client’s planning needs are completely different in their twenties to their fifties and, while it’s true to say there’s no such thing as an ‘average’ client, this short guide will hopefully help to set most people on the right path to a well-planned and prosperous financial future.

In this article we look at financial planning in your twenties, thirties and forties – next month we’ll look at how your financial planning needs change as you move into your fifties and beyond.

In your twenties

For many people their twenties come with one huge financial planning plus – no children. If you’re what used to be known as a DINKY (dual income, no kids) then it makes sense to take advantage of it.

It may not sound much fun to think about a pension as you contemplate nights out and holidays in Ibiza, but making a start on saving for your retirement – even if the contributions are relatively low – will pay huge dividends later on in life. With the vast majority of people now set to retire at 65 or later, money invested in your twenties will have the best part of 40 years to grow and benefit from the tax advantages that pensions enjoy.

It’s also important to start saving for the deposit on your first home. Mortgage lenders have toughened up their lending criteria considerably over the past few years and the more deposit you can put down on your first home, the better mortgage rate you’ll be able to obtain.

If you are saving in your twenties, then make sure that you save tax efficiently by opening an Individual Savings Account (ISA). There’s no point paying tax on your savings when you don’t need to.

Finally, your twenties may be a good time to look to reduce debt. With university students now expecting to graduate with upwards of £30,000 of debt, the time before children and mortgages come along may be a sensible time to try and pay off some debt – and hence ease the burden of future interest charges.

In your thirties

Your thirties can be a tough time financially, especially if starting a family means that one partner isn’t working, or only working part-time. Perhaps the most sensible advice is to try and avoid debt building up in your thirties – but if it is unavoidable, keep an eye on the interest rate you’re paying and try and pay off ‘expensive’ debt (such as credit cards) first.

If you’re in a company pension then your contributions will automatically be deducted from your wages – however, if you’re not in a company scheme, or you’re self-employed, then it is vital that you start to make some pension contributions at this stage in your life.

It’s also a good idea to start working with an independent financial adviser to regularly review your finances – for example, to make sure you have the most competitive mortgage and that your pension is on track to give you the retirement you’ll ultimately want.

Even though your thirties may be difficult financially, it obviously makes sense to try and save a little. As in your twenties, remember to make sure that your savings are invested tax efficiently and don’t be afraid to take a long term view with them.

In your forties

The good news as you enter your forties is that you’ll now be approaching your peak earning years. The chances are that you’ll still have children at home and a mortgage to pay, but now is the time to be increasing your pension and savings contributions and cutting down on debt.

These are the years when good financial planning can make a tremendous difference to your long-term prosperity. It’s not that many years since you were in your twenties – and sadly, it won’t be that long until you’re retiring, so efficient and effective planning becomes ever more important.

Many people start to inherit money in their forties and it might also be the time to start thinking about the potential cost of further education for your children. A lot of clients we speak to simply don’t want their children to graduate with a huge burden of debt, and savings that are made now could help your children significantly.

As we said at the beginning of this article, there are as many ‘right’ answers to financial planning as there are clients, every client is different – but the guidelines above will hold good for most people.

If you’d like to talk to us at any time about your financial planning – irrespective of your age – then don’t hesitate to contact us. 01737 225665 or advice@conceptfp.com

 

building your financial future