Category: News

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.