Tag: mortgage


financial planning in your forties

It’s well known life begins at forty. Doesn’t it?

It should be an exciting decade, full of plans and aspirations. It’s also likely to be a time of optimum earning potential.

What’s more, it’s a crucial decade to take a step back and make sure your finances are on track to meet your goals.

There’ll be some decisions you’ll already have taken in your twenties or thirties, which will have had an impact. You may have bought your own home, for example, or put some savings away in cash, investments or pensions.

If things don’t look quite as rosy as you’d hoped, though, your forties are a good time to take stock, as there’s still time to make adjustments and give your investments time to grow.

Don’t forget, whatever savings you can make now will enable you to pursue your dreams later on.

Here are four key tips for shrewd financial planning at this important time of life.

Budget ruthlessly

Just because life may feel comfortable with regular pay rises and bonuses don’t fall into the temptation of spending more than you need. Do you really need that Costa coffee or M&S lunch every day?

Apps like Money Dashboard or Moneyhub can be helpful in showing you where your money’s going. Simple steps like cancelling subscriptions or switching bill providers can make a significant difference.

Historic studies show that investments usually outperform cash savings so any disposable income you can invest will be beneficial. If you can put money aside in a pension you’ll also be taking advantage of the tax relief available. Make sure you use your ISA allowance too for more accessible funds.

Carry out a protection audit

Think about what if the unexpected happened. Your forties are a time of life where you may find yourself part of what’s known as ‘the sandwich generation’ i.e. caring for elderly parents at the same time as looking after young children. This can put extra pressure on you. Make sure you’re protected should the worst happen by ensuring you have a good emergency fund in place. Also think about critical illness cover and life insurance.

Property plans

Your home will be a fundamental part of your financial planning at this time of life. If you feel you need a larger property, these are likely to be your peak earning years so now is the time to secure the best mortgage you can and find your dream home. On the other hand, if you’re quite happy where you are, it may be a good time to remortgage to get a better deal.

Family spending

Everyone’s situation is different. You may have children at university or you may still be having to pay for nursery fees. Whatever your position, make sure you budget accordingly and allow for inflation, especially if you’re paying private school fees. Work out the priorities for your family – the best education now or a house deposit in the future. It’s important not to derail your own life savings for the sake of your children as no one will benefit in the long run.

By doing some sound financial planning now, you’ll have more hope of continuing in the style you want to live, well beyond your forties.


interest rate rise: what does this mean?

goldfish jumping from small bowl to big bowlThe Bank of England has raised interest rates from 0.5% to 0.75%, only the second rise in a decade. Currently, interest rates stand at their highest since 2009 and reflect what the Bank of England perceive as a general pick-up in the economy.

The Bank said that a rise in household spending has strengthened the British economy. Economic growth for the year is predicted to be 1.4% this year and the unemployment rate is expected to fall further below 4.2%, where it currently stands.

How does the rise affect you?
If you are on a variable rate ‘tracker’ mortgage, your repayments will increase. For example, if you have a £100,000 mortgage, this will add £12 to your monthly repayments.

It’s important to highlight that if you are on a fixed rate mortgage, your payments will stay the same until your base rate comes up for renewal. The Bank of England’s announcement does not mean that your rates immediately rise.

For prospective borrowers, the interest rate rise signals a change in the Bank of England’s tone. Further rate rises are a definite possibility. However, the Bank’s governor took a rather cautious tone which indicates that there are unlikely to be any more rises until 2019.

For the time being, base rates on mortgages are unlikely to rise above 3%. That said, the demand for rate fixes will be higher than usual this year.

Unfortunately for those of you going on holiday, after the announcement the pound fell by 0.9% against the dollar. This is due to the extreme political uncertainty surrounding the sterling with Brexit taking an unchartable track.

Reactions from U.K. businesses have been a mixed bag. The Institute of Directors, which represents about 30,000 members in the U.K., has said, ‘the Bank has jumped the gun’, whilst the British Chamber of Commerce similarly described the decision as ‘ill-judged’ at an uncertain time.

This negative perspective wasn’t unanimous among all lobbying groups. The Confederation of British Industry, the country’s biggest business lobby, welcomed the rise saying the case for higher rates had been building.

A small rise of 0.25% is likely to have a minimal impact on your finances. However, larger hikes down the line could have a substantial effect on the British financial landscape.


Is the bank of mum and dad ‘feeling the pinch’?

The bank of Mum and Dad’ will lend enough money to the next generation of UK homeowners in 2018 to make it the equivalent of a top 10 Mortgage Lender. With £5.7bn expected to be handed over to help family members get a foot on the property ladder this year, you could be excused for thinking that things were on the up. Everything is relative, however, and when compared to 2017’s enormous lending figures of £6.5bn, the numbers tell a different story.

L&G are still expecting more than a quarter of home buyers to be getting financial assistance from relatives, with the amount actually seeing a small increase from 25% to 27%. So with close to 317,000 housing transactions expected to take place with parental help this year, how do we account for the £800m drop in lending?

The short answer is that, due to the current position of the economy as a whole, people are feeling the pinch. Although the sheer volume of individual transactions is increasing, the amount lenders are able to provide is going in the opposite direction. In 2017, the average contribution was £21,600, in 2018 that figure is expected to be down 17% at £18,000.

Interestingly, although unsurprisingly, this is a regional phenomenon, with a higher percentage of buyers in London (41%) receiving help from their relatives.The age of the buyer also affects the likelihood of lending, but by no means is it exclusive to younger buyers. Three in five under-35s are expected to receive help, but so are 20% of those between the ages of 45 and 55.

We’re also seeing a growing trend of parents ‘gifting’ their children money that they would otherwise have received years later through inheritance. Not only does this make the money less likely to be liable to inheritance tax, it also means that the buyer can get on the property ladder earlier and thus avoid future increases in house prices. For many in financially comfortable positions, this may well be an avenue worth considering.


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%.

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%.


house prices to slump in 2017?

Recent figures suggest that house prices are set to slow during 2017. Property prices grew by 5.7% in the year to the end of January, slower than the annual growth of 6.5% in the previous month.

In January, the average UK home was valued at £220,260. Whilst prices in the three months to the end of January were higher than in the previous three months, the figures show that in comparison to the same period one year before, growth was beginning to slow, coming in considerably lower than the 10% peak of March 2016. In fact, compared to December 2016, prices in January 2017 dropped by 0.9%. The figures mean that the property industry now has a decidedly mixed outlook for the year ahead.

“January is always a lethargic month for UK property as a result of the Christmas break”, said founder of eMoov.co.uk Russell Quirk, “and so any fall in house prices at this time of year should be taken with a pinch of salt, rather than a handful of panic. Had any other market around the world been subject to such a sustained period of scaremongering and uncertainty amongst buyer and seller as the UK market has in the last year, I expect it would be a different story to the one we are seeing here.”

However, some estate agents have warned that concerns over rising inflation and the effect it will have on both interest rates and general living costs are impacting upon the decisions the UK public is making regarding buying and selling property. There are also worries over the tightening of mortgage criteria, as well as the focus on affordability.

Whilst prices have been kept up by both lower rates of interest and the relatively small number of houses on the market, other factors will work to slow price growth throughout this year. These are likely to include the weakening of economic growth, the increasing pressure felt on spending power and restrictions to affordability, making the outlook for the property market in 2017 considerably uncertain.



The first nine months of Help To Buy

The Help to Buy mortgage guarantee scheme opened on 8th October 2013 and has since been available across the United Kingdom. Under the scheme, the government offers lenders the option to purchase a guarantee on mortgage loans where the borrower has a deposit of between 5% and 20%. The scheme can be used for mortgages on both new build and existing homes, by first time buyers, home movers and those remortgaging.

In order to qualify for a loan supported by the Help to Buy mortgage guarantee, there are a number of eligibility criteria which are set out in the scheme rules.

The guarantee compensates participating mortgage lenders for a portion of net losses suffered in the event of repossession. The guarantee applies down to 80% of the purchase value of the guaranteed property covering 95% of these net losses. The lender therefore retains a 5% risk in the portion of losses covered by the guarantee. This ensures that the lender retains some risk in every mortgage originated.

In the first 9 months of the Help to Buy scheme:

  • 18,564 mortgages were completed with the support of the scheme. Of these, 79% were purchases by first time buyers.
  • The total value of mortgages supported by the scheme was £2.7 billion.
  • The mean value of a property purchased or re-mortgaged through the scheme is £153,148, compared to a national average house price of £265,000.

Mortgage completions in Scotland, Wales and Northern Ireland accounted for 19% of the total. In Scotland and Wales the number of mortgage completions with the support of the scheme was proportionally higher than in the UK as whole, when compared to total mortgage completions. Completions with the support of the mortgage guarantee scheme in Northern Ireland made up 1% of total UK completions supported by the scheme.

Mortgage guarantee completions in England were proportionally lower, with 81% ofcompletions compared to an 86% share of overall UK residential mortgage completions.

At a regional level, a higher proportion of mortgages were supported by the scheme in the East and North West. London and the South East accounted for 19% of all completions supported by the scheme.

Sources: www.gov.uk (Quarterly Statistics – October 2013 to June 2014



building your financial future

The new ‘Help to Buy’ Scheme: Good Idea or Long Term Danger?

One of the central planks of George Osborne’s Budget speech in March was the introduction of the ‘Help to Buy’ Scheme – a move designed to boost the housing market and give the building industry a shot-in-the-arm.

At the time the move received a cautious welcome. There were some doubts, but by and large most commentators favoured the scheme, given that what the Chancellor could do was restricted by the world economic downturn.

Two months on sentiment seems to be changing. There may not be outright hostility to the Scheme, but there is certainly more scepticism – with the Spectatordescribing it as ‘friendless’ and outgoing Governor of the Bank of England Sir Mervyn King warning that the Scheme should not be allowed to become permanent.

So what is the ‘Help to Buy’ Scheme? And why is it suddenly being viewed less favourably?

The basic details of the scheme are relatively straightforward:

  • It is made up of two elements – an equity loan, which has been available since April 2013 and a mortgage guarantee, which will be introduced from January 2014
  • If you have a deposit of 5% then you can borrow a further 20% from the Government, which will be interest free for 5 years
  • The scheme applies to new build properties valued below £600,000 and the buyer must have full ownership of the property – so it does not apply to shared equity schemes
  • From January 2014 the Government will make £12bn available in mortgage guarantees, which it believes will allow £130bn in extra mortgages to be taken out
  • Both parts of the scheme are available to first time buyers and existing homeowners, and the mortgage guarantee scheme also applies to pre-owned properties.

On the face of it, an eminently sensible scheme: so why is the scheme now coming under fire? And are there danger signals for the wider economy?

It is unusual for a Governor of the Bank of England to criticise government policy – but with Sir Mervyn King shortly due to step down he perhaps feels more free to speak. His criticism of the Scheme stems from what he calls ‘the paradox of policy’ – that something which seems attractive in the short term may end up being counter-productive.

All experts are agreed that the ‘Help to Buy’ Scheme will push house prices up: if this is not matched by an increase in housing supply then first time buyers will stillnot be able to get on the housing ladder as they chase ever-rising prices.

King’s main worry, however, is that the Scheme will continue indefinitely, exposing the UK taxpayer to private mortgage debt, as happened in the USA. Despite Government assurances that the scheme will only last for three years, the Treasury Select Committee admits that pressure to continue it will be ‘enormous.’

The Scheme has also been criticised by right-wing economists, who disapprove of the Government interfering in what is essentially a private market – and one that has worked well in the past without Government interference.

The main criticism, however, is that the Scheme is once more focusing the UK economy on consumption and housing market – when it should be looking towards manufacturing and exports. It is a short-term solution with potential long-term problems and does nothing to address the underlying weakness in the economy. This is the reason some commentators feel it will ultimately be detrimental to the wider UK economy.

In the short term, the ‘Help to Buy’ Scheme may well help some of our clients buy a home or move up the housing ladder. In the longer terms its impact may be less certain, both for individuals and the wider economy. As always, we’ll keep you up to date on the impact of all the Government initiatives and their implications for your financial planning.


building your financial future

Sources: http://www.rightmove.co.uk/help-to-buy.html, http://www.guardian.co.uk/business/marketforceslive/2013/may/09/barratt-housing-market-government-scheme, http://www.bbc.co.uk/news/business-22581191, http://blogs.spectator.co.uk/coffeehouse/2013/05/the-friendless-help-to-buy-scheme/




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

Are you still on a Standard Variable Rate

Time to Review your Mortgage?

Most people are sitting on the Standard Variable Rate (SVR) with their existing mortgage lenders due to Bank of England rates being at a historical low and because it may not be cost effective to move your mortgage once you take into account the arrangement, valuation and legal fees. 

However, two lenders are now leading the way offering remortgage deals – not only competitive tracker rates which also offer an option to switch later into an available fixed deal whilst incurring no penalties, but we are also now seeing some realistic and competitive 5 year fixed rates available (offering rates as low as 3.75% with free valuation and basic legals) thereby offering the security of a fixed rate and an enticement for mortgage holders currently with their existing lenders SVR during these uncertain times.

We have no idea how long these deals will be available for or indeed if this is a sign that the rates are about to increase. However, these deals could be the right fit for high equity mortgage holders, and could prove to be cost effective as well as offer security for the deal period.

Whilst we appreciate this may not suit everybody’s individual needs and circumstances today, tomorrow is a new beginning and that’s why at Concept we offer a free service to watch your SVR and alert you at the time when we feel the best fitting mortgage  becomes available for you.  Taking the hassle away and allowing you to focus on the things that are important to you.



Please beaware that your home is at risk of repossession if you do not keep up with mortgage repayments on it

Mortgage rates can go up as well as down