Author: timdurman

With Bank of England interest rates increasing to 0.5% in February¹, millions of households may now be feeling the additional squeeze on the cost of living as their monthly mortgage payments rise, according to trade body, UK Finance².

Furthermore, their findings reveal that one in four mortgage borrowers on variable rate deals will be immediately affected by the rise, and millions more once their existing fixed rate mortgage terms are due for renewal.

The February 2022 interest rate rise, made by the Bank of England increased rates by 0.25% to the current 0.5%. Although sounding a small increase, the change will have an impact for many, especially those already feeling the squeeze with rising energy bills and coping with the after-effects of the Covid-19 pandemic.

The rate increases mean that a homeowner with a £150,000 mortgage would typically have to pay an extra £21 a month, or £252 a year, according to figures from brokers London & Country³.

Rising costs across the board

This adds on to the increasing energy costs, driven by the recent removal of the energy price cap, which means that the average household can expect to see increases of £1,200 a year, according to think-tank Resolution Foundation⁴. Elsewhere, the rising inflation, which has been the highest in 30 years⁵ means that we will all see the effects of rising prices across products and services in daily life.

Review your mortgage now

With so much change, it’s a good time to review your mortgage to make sure that you’re not paying any more than you need to.

Those most affected by the changes are homeowners with a variable rate mortgage, linked to interest rates, however those on fixed rate period mortgages may start to see changes over time too. We advise that you get in contact with us to talk through your existing mortgage and let us check that you’re on the most suitable deal for your current circumstances.

Sources

1 –   Bank of England (2022) Interest rates and Bank Rate. Available at: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate (Accessed 16th Feb 2022)

2 –  UK Finance (2021) How the Bank Rate Affects Mortgage Rates. Available at: https://www.ukfinance.org.uk/news-and-insight/blogs/how-the-bank-rate-affects-mortgage-rates (Accessed 16th Feb 2022)

3 –  Duncan, H. (2022) City experts say interest rates could increase five times this year as Bank of England battles against inflation. Available at: https://www.thisismoney.co.uk/money/markets/article-10454913/Rates-rise-FIVE-times-year-ward-inflation.html (Accessed 16th Feb 2022)

4 – Resolution Foundation (2022) 2022 Set to be the Year of the Squeeze. Available at: https://www.resolutionfoundation.org/press-releases/2022-set-to-be-the-year-of-the-squeeze-as-wages-stall-and-families-face-a-1200-hit-from-next-april-as-energy-bills-and-taxes-rise/ (Accessed 16^th Feb 2022)

5 – Giles, C. (2022) UK Inflation Jumps to highest level in 30 years. Available at: https://www.ft.com/content/9188e191-4c1c-4968-a3af-9a43f086de6b (Accessed 16th Feb 2022)

In the wake of the spiralling cost of energy which has quadrupled in the past year¹, regulator Ofgem has announced an increase to the energy price.

This will see almost a £700 increase in energy bills for the average household from April 1^st. The government has moved to help offset the price increases through the targeted Energy Bills Rebate, which will mean that according to the government up to 28 million households will receive funding to reduce this cost².

The government has stated that every domestic electricity customer will get £200 off their energy bills, with 80% of households receiving a £150 Council Tax rebate from April.

Energy suppliers will apply the discount to domestic electricity customers from October, with the Government meeting the costs. However, it is important to understand that the discount is not free. The discount will be automatically recovered from customers’ bills in equal £40 instalments over the next five years. This will begin from 2023, when global wholesale gas prices are expected to come down.

Additionally, there will be council tax rebates made available. Householders in England, who are in council tax bands A-D, will receive a £150 rebate. The rebate to bills will be made directly by local authorities from April. This will not need to be repaid. According to the government, this one-off payment will benefit around 80 per cent of all homes in England.

It had been argued that a cut in VAT on energy bills would be a viable tactic to help reduce costs, but the government claims that its rebate scheme and is more generous and more targeted towards lower-income families than a VAT cut on energy bills³.

There is concern that there will be many owners of property outside the A-D bands who are on fixed incomes, such as the retired, who will also suffer hardship. However, the government has set aside a discretionary fund of £144 million to support those who pay council tax for properties in Bands E-H. Whether this will be enough only time will tell.

Make sure you check whether you are eligible but while the council tax rebate is non repayable, remember that the £200 rebate will be repaid by customers in instalments from 2023.

Sources

1 – MacDonald, P. &  Brown, S. (2022) UK electricity prices quadrupled in 2021. Available at: https://ember-climate.org/commentary/2022/01/14/uk-electricity-prices-fossil-gas/ (Accessed on 16^th Feb 2022)

2 – HM Treasury (2022) Millions to receive £350 boost to help with rising energy costs. Available at: https://www.gov.uk/government/news/millions-to-receive-350-boost-to-help-with-rising-energy-costs (Accessed on 16^th Feb 2022)

3 – Kumar, C., Caddick, D. & Stirling A. (2022) The Unequal Impact of the Energy Bill Crisis. Available at: https://neweconomics.org/2022/01/the-unequal-impact-of-the-energy-bill-crisis (Accessed 16th Feb 2022)

It is likely that 2022 might see an end to lockdowns, but the residual economic repercussions are going to be felt in all of our pockets this year.

Not only are we facing increases in the cost of electricity and gas but are also looking at the effect of inflation on our savings and spending power. Inflation is predicted to go as high as 7%¹. However, it is also important to look at the extra taxation we are now facing from April 2022.

Analysis by investment platform AJ Bell suggests that households face a likely £2417 cost of living increase when cost of living rises are taken into account².

National Insurance

From the 6th April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25 percentage points³. The increase will apply to employees (Class 1) and the self-employed (Class 4) as well as to employers (Class 1, 1A and IB) but will not apply to workers who are over the state pension age.

The official reason for the increase is described as a levy to go towards the NHS, health, and social care.

It has been calculated that depending on earnings, the increases* will look like this: –

Salary

• £20000 – an extra £130 pa
• £30000 – an extra £255 pa
• £50000 – an extra £505 pa
• £80000 – an extra £880 pa
• £100000 – an extra £1130 pa

State pensions

The state pension is increasing by 3.1% in April, but with the spectre of increasing inflation this Spring which according to the Bank of England is likely to reach 7% before falling back¹. Consequently, pensioners are going to be worse off in real terms.

In a move which puts more pressure on pensioners, a freeze has been placed on increasing the value of state pensions for this financial year. Since 2010, pension values have increased by at least 2.5% to keep in line with inflation each year under a ‘triple lock’ arrangement, however the freeze has been attributed to the Covid-19 pandemic causing an unexpected rise in wages, which has led to high inflation and would otherwise mean pensions increasing by 8%⁴.

Together with increasing costs of living, 2022 is likely to be remembered as the year of belt tightening.

Sources

1 – Bank of England (2022) Will inflation in the UK keep rising? Available at: https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising (Accessed 16th Feb 2022)

2 – Suter, L., Khalaf, L. & Selby, T. (2021) Ten Big Financial Changes for 2022. Available at: https://www.ajbell.co.uk/news/ten-big-personal-finance-changes-2022and-what-they-mean-savers-and-investors (Accessed 16th Feb 2022)

3 – HM Revenue & Customs (2022) Rates and thresholds for employers 2021 to 2022. Available at https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022 (Accessed 16th Feb 2022)

4 – Peachey, K. (2021) What is the Triple Lock and why has it been suspended? Available at: https://www.bbc.co.uk/news/business-53082530 (Accessed 16th Feb 2022)

Garden outbuildings became a haven for many during the pandemic, whether functioning as a home office, garden playroom or even a home bar setup.

However, there’s new evidence that you need to be careful not to become a burglary victim. According to data from insurer LV=, there has been a 43% increase in theft from sheds and buildings, such as standalone garages. At a time when the world of work has had to adapt to homeworking during the pandemic and lockdowns, many of these spaces have been pressed into service as home offices and can often contain some highly valuable technology equipment¹.

Before the pandemic, a third (33%) of all home claims reported were for burglary, compared to around a fifth (20%) of all claims reported in 2021. However, claims are now starting to rise again, with the highest number of claims reported in November 2021 since December 2019.

LV=’s report also notes that over the last two years when UK restrictions have been relaxed, claims have increased by around a quarter, with the average claim currently costing around £5,000, up from an average of £4,700 in the preceding three years.

It is important that owners of external home offices to not assume that their existing home insurance policies will cover them for home working. Insurers are seeing claims for high value items like mobile phones, laptops, and associated paraphernalia such as printers and scanners.

According to LV=, there are a number of actions you can take to make your home office and garden buildings less of a target for opportunist burglars.

It goes without saying that homeowners should check all doors and windows are securely locked before leaving the house. It is too easy to forget to check.

1. Grow natural defences such as prickly hedges and dense bushes to protect your garden and put off potential intruders.

2. Consider installing burglar alarms on sheds, garages, and outbuildings. From simple alarms to systems that transmit CCTV images to your mobile phone, there is a wide range to choose from.

3. Install motion-sensitive security lights.

4. Remember that cheap, panelled doors can be easy to kick down. Try to replace flimsy doors and frames with strong, quality doors with good quality locks.

5. Be careful what you share on social media. Images of new and expensive purchases around the home and planned holidays can get picked up by thieves.

6. Make sure your home insurance is up to date and that it covers all of your belongings, including garden furniture. If you’re not sure, talk to your adviser for help or call your insurer.

Sources

1 – LV= (2022) Thefts soar by 43% in 2021 as the nation’s home offices become a target for thieves. Available at: https://www.lv.com/insurance/press/thefts-soar-by-43-percent-in-2021-as-the-nations-home-offices-become-target-for-thieves (Accessed on 16th Feb 2022)

In light of the announcement this morning that the Bank of England has increased interest rates, we wanted to write to you to explain how that might affect your mortgage. The increase to 0.5% from 0.25% comes as households face soaring energy bills and rising costs to the weekly shop.

The good news is that if your mortgage is on a fixed rate, your monthly repayments are unaffected. So, along with the other c.74% of mortgage holders who are on fixed rate deals your foresight in fixing your repayments will now prove its value. People with fixed rate mortgages are likely to be affected once they reach the end of their current deal. An interest rate rise could make remortgaging more expensive.

If you have a variable rate tracker mortgage that is linked to the BoE base rate, you are likely to see an immediate impact on the amount you repay. Those on a standard variable rate (SVR) could see an increase which is decided by the lender. If you are unsure, it is worth checking your mortgage terms and conditions in your mortgage offer document.

If you are on your lenders SVR, please ensure that you get in touch as you could be paying more than you need to be.

However, further rate increases cannot be ruled out and whatever your mortgage type, we strongly recommend you look at the terms of your mortgage and contact your financial adviser, who can review your mortgage needs for the future and help you plan to be in the best position to cope with the current turbulence in financial markets. It’s always a very good idea to have a financial plan in place to deal with any potential interest rate changes.

Banks and building societies are increasingly subject to technology problems that have caused issues with access to funds, transferring money or the payment of bills¹. The latest, involving Nationwide Building Society meant that some customers were unable to access funds or had to wait for wages to reach their accounts in two separate incidents within days of each other.

Many of these issues have centred around mobile and internet banking and gaining access to accounts. However, the alarming prospect of having a debit or credit card refused at a busy checkout and the worry caused by being unable to withdraw funds from ATMs is becoming an increasing concern to many consumers.² This is particularly true in areas that are losing or have lost their branch and their ATM is broken or simply rejects the card.

According to findings from The Telegraph³, the advances in technology are also causing issues for older customers where personal services at branches are disappearing as well as the branches themselves. In their place, the insistence on pushing customers towards an online relationship with their bank is causing age discrimination and confusion.

When the technology works well, it is revolutionising the way we deal with money and is to be applauded. However, our reliance on it, as highlighted by the number of outages, makes us all potentially vulnerable.

There are a number of strategies that can help –

1. Open a current account with a small overdraft facility with another provider thereby reducing the risk of two providers going down at the same time.
2. Keep an independent credit card especially for the times when you need to pay for goods if your current provider is having an outage. Just remember to pay off any balances within the free credit period.
3. Post Office branches provide facilities to cash cheques, forward money to your bank and also withdraw cash.

The important thing to remember is that technology and its applications are here to stay. When it goes wrong, which it will do from time to time, we must have contingency plans to help us when things aren’t working.

If you have older relatives talk to them about the easiest ways to protect them from the likely problems caused by technology. Find alternative solutions for managing their money by using a post office or a building society branch for the personal service they feel they need where possible, rather than struggling with a digital world that is alien.

Sources:

1. Money Expert (2021) Outage Leaves Nationwide Customers Unable to Send or Receive Money. Available at: https://www.moneyexpert.com/news/outage-leaves-nationwide-customers-unable-to-send-or-receive-money/ (Accessed 26 Jan 2022)
2. Smith, Nina (2021) 5 Common Problems with ATM Machines and How to Solve Them. Available at: https://citizenjournal.net/problems-with-atm-machines/ (Accessed 26 Jan 2021)
3. The Telegraph (2007) Pensioners struggling as banks close. Available at: https://www.telegraph.co.uk/news/uknews/1542150/Pensioners-struggling-as-banks-close.html (Accessed 26 Jan 2022)

According to a report by retirement specialist Just Group, home owning pensioners are not claiming the maximum benefits to which they are entitled or in some cases claiming none at all. Up to one in five pensioners are eligible for up to £1220 more than they are currently claiming.¹

The main contention is that retirement guidance does not cover benefit entitlement as seriously as it should. While the old age pension is automatically granted when people reach pension age, there are three main benefits that have to be applied for and are all means tested.

Guarantee Pension Credit

Designed to help pensioners over state pension age on low incomes. According to the Just Group report, roughly seven out of ten have signed up for this benefit, those who fail to claim are missing out on up to £2265 per annum. This money that can help offset rises in the cost of living, as well as help with housing costs for service charges, and even for extra help around the house or care for those whose mobility is becoming a problem.

Savings Pension Credit

This acts as a top up for those who reached state pensionable age before 6^th April 2016 and who have made efforts to provide for themselves in retirement through their own savings. It is estimated that on average claimants could be better off to the tune of £596 per annum, according to Just Group.

Council Tax Reduction

Findings from the report also showed that eligible pensioners could be claiming as much as £748 a year, and from the sample polled, 49% were missing out on at least one of the benefits above.

If you have family members who are retired, it would be worthwhile checking that they are claiming every benefit to which they are entitled.

There are resources to help them including charities like Age Concern and Citizens Advice and government backed organisations such as the Money & Pensions Service (the new name for the Money Advice Service) https://moneyandpensionsservice.org.uk .

Sources:

1. Just Retirement (2022) Nearly 7 in Ten Pensioner Homeowners eligible for State Benefits are missing out. Available at: https://www.justgroupplc.co.uk/~/media/Files/J/JRMS-IR/news-doc/2022/nearly-seven-in-10-pensioner-homeowners-eligible-for-state-benefits-are-missing-out.pdf   (Accessed 26 Jan 2022)

Changes to Insurance Pricing Practices by the industry regulator, the Financial Conduct Authority, are designed to improve the way general insurance markets function. In simple terms, anyone renewing their insurance with an existing insurer will now pay no more than a new customer would. The new rules aim to increase transparency for customers who are renewing their insurance products.

The process by which products are heavily discounted in year one, then increased at renewal and again in subsequent years, known as ‘price walking’ has been effectively outlawed by the FCA from January 2022¹. Essentially, existing customers were subsidising new ones, to their financial detriment. Customers who remain loyal to an insurer will no longer be subsidising people who switch to other insurers offering cheap first year premiums.

Those insurers have benefitted from the inertia of many customers, who have therefore paid increasingly more for their cover year on year. This has allowed insurers to use those profits to offer new borrowers enticing first year discounts². 

It also means that your financial adviser will now be in a stronger position to help find policies specifically tailored to customers but with premiums that no longer have to compete against heavily discounted deals offered online. Most importantly, it will change the emphasis from cheapest cost to value for money.

In order to comply with the new rules, insurance companies have to abandon heavy discounting for new policyholders, in order to ensure that existing customers are not paying more at renewal.

As new policy and renewal premiums become more equivalent, so the adviser is again in the best position to offer real advice based on actual benefits other than price.

Summary

• New rules mean that renewing home insurance with an existing insurer will now cost no more than a new customer pays
• Insurers now have to notify customers whether their policy T’s & C’s provide for automatic renewal, the effect of the renewal, and how the customer can cancel the automatic renewal element at any time
• Insurers will no longer be able to subsidise large introductory discounts to new borrowers via existing customer renewal increases
• Auto renewal facilities, where policies automatically renew without direct customer intervention, will only be allowed if insurers provide adequate warning of policy and premium changes

Sources

1) Brignall, Miles (2021) UK insurers to be banned from offering cheapest deal to new customers. Available at: https://www.theguardian.com/money/2021/dec/30/landmark-uk-insurance-shakeup-poised-to-benefit-loyal-customers (Accessed 26 Jan 2022)

2) Hasler, N (2021) FCA’s New Rules Against General Insurance ‘Price Walking’. Available at: https://www.icsr.co.uk/fca-new-rules-against-general-insurance-price-walking/ (Accessed 26 Jan 2022)

January, February and early March have traditionally been the coldest months of the year and as the weather gets colder and we are all reaching for thermal underwear and heavy coats, it would be wrong and potentially expensive to forget that our homes also need to be wrapped up and ready for winter.

Check your home and contents insurance policy

Talk to your adviser today and make sure that you know what you are covered for and whether that cover is adequate for both the house and your valuables.

If you haven’t already, consider adding Home Emergency cover to your home insurance policy in preparation for any household emergencies.

Now, what about the house?

Check your roof

We had some pretty wet and windy weather during 2021 and it can’t have escaped your notice that the weather is becoming more unpredictable. While you can do a visual inspection from ground level, it is advisable to have a professional check your roof for any signs of damage such as missing tiles. At the same time have the chimney stack checked, particularly the flashings to ensure that water is not getting into the roof space.

Gutters

Gutters can become blocked and if they do, it is easy for trapped water to turn to ice in cold weather and create extra weight which can bring down gutters and in turn cause damage to external brickwork.

Time for a loft inspection

If the last time you were in the loft to put away your summer luggage or the Christmas decorations, take a little time to see if you can see any obvious signs of daylight in the roof, which would tell you that a roof inspection for tile damage is not just an option. Also take a look at your insulation in the roof space. Is it still fit for purpose? Heating bills can be significantly reduced with comprehensive roof space insulation.

Header tanks and pipework

The loft can also contain a water header tank depending on your heating system and will certainly have pipework. Insulation is a must, particularly if the water freezes and adds pressure on the tank itself, which could lead to leaks. Pipework needs to be adequately insulated. Check it anyway, it is easy to miss where insultation has been disturbed while moving items in the loft.

Boiler

As we enter the winter months, where our need for heat and hot water is going to be at its height, arrange for a boiler service as a priority.

Find your stopcock

Make sure you know where your stopcock is. In the event of a water leak, knowing where it is will mean less damage to your property and its contents. Also ensure that every family member is aware. Check that the stopcock is not stiff to turn. A little lubrication and turning it on and off will make sure that it is ready, should the worst happen.

Open fires and woodburners

We all love an open fire, but don’t forget that your chimney deserves a thorough clean, particularly if a fire has not been lit since earlier in the year. Soot and blockages can have a detrimental effect on the ventilation of your room, as well as running the risk of old soot being dislodged and making your living space unusable.

Smoke and carbon monoxide detectors

Check your detectors work. Whatever happens, if you can’t remember when you last changed the batteries – change them anyway.

While we are horrified when we see natural disasters occur around the world and the impact it can have on residents, widespread flooding and heavy storms are also becoming a fact of life for many here in the UK.

Power failures might only be temporary, and storms can last just a few hours, but it is best to be prepared.

Therefore, have a home emergency kit at hand – just in case.

Items could include:

• External mobile phone batteries
• Cash and debit card
• Torches
• Batteries
• Candles
• Matches
• Bottled water and canned food
• Blankets and waterproof clothing
• A list of local emergency numbers
• Your insurance details.
• A first aid kit

Winter holiday coming up?

Remember if your home is going to be empty for a reasonable period over the during the winter period, consider leaving the heating on to prevent your pipes from freezing and risking a burst. Similarly, if you are a landlord or second property owner with an unoccupied property, your insurance policy may also have specific terms which mean you need to maintain the property at a certain temperature or you may not be covered for escape of water claims.