EU Referendum: The Changes to your Finances
Subash Shangary (Managing Director, Berkeley Private Wealth, High Net Worth Wealth Management, Email: subash.shangary@berkeleypw.com)
There will be an immediate impact on some but not all of our finances. Some of the impact may only be temporary, however they should be taken into consideration when making choices in regards to your overall finances. It should also be noted that we are in uncharted territory and more changes are highly likely to be implemented as the UK negotiates the terms of its exit. In the coming months the main focus for the government would be the health of the UK economy. In the very short term however, these are the changes that have taken place:
- Retirement Income
The biggest impact would be on pensioners who have taken out an annuity, the rates have been on a steady decline for a year. However on Monday, two major providers cut their annuity rates. One of whom cut their rates by 2%. This is going to have a significant impact on pensioner’s monthly income. What makes it difficult for those who bought an annuity is the fact that it is a one of decision, once bought; there is no going back.
- Investments
All this uncertainty has caused volatility in the markets. Investors may have seen a fall in their portfolio; but this depends on what types of investments were in their portfolio. Gold was at a 2 year high on Friday, which is understandable as gold has always performed well during times of uncertainty. Investments in their purest form are long term decisions and therefore may recover their value over time.
- Mortgages
This is one area that is very difficult to gauge. Swap rates have been falling since the vote to leave the EU on Thursday. If mortgage rates follow suit, it could mean that home buyers and home owners who are looking to remortgage, may find their monthly repayments becoming cheaper. Rates have been extremely low for a while now, but lenders may decide to tempt first time buyers, movers and those looking to remortgage with cheaper rates. During times of uncertainty, house prices fall. Good news for buyers.
- Foreign Exchange
The fall in the pound is the most noted change to our finances, for every £100 you change to euro; you’ll get £9 less in euros; £12 less in US dollars in comparison to before the vote. However the daily fluctuations have been volatile and therefore this is subject to change significantly.
- Interest Rates
At the time of writing, there has been no change to interest rates. The Bank of England’s Monetary Committee are scheduled to meet in July. If they cut the interest rate, then borrowers would see better deals however savers would be worse off with lower returns; vice versa if they raise the interest rates. Only time would tell which direction they would take.
