ESSENTIALLY MORTGAGES - QUILTER FA ESSENTIALLY MAG_Q2 2020_MORTGAGES_V4 ...
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Essentially Mortgages In uncertain times – we’re here for you Could now be the right time to remortgage? Keep calm and organise your finances Q2 2020 Protecting your income – need to knows Should I write my life insurance in trust? What does the interest rate slash mean for you?
In this In uncertain times – we’re here for you______________________ 2
Spotlight on protection____________________________________ 3
issue Keep calm and organise your finances ______________________ 3
The Budget – housing news________________________________ 4
Should I write my life insurance in trust?___________________ 4
Equip yourself – be scam smart____________________________ 5
What does the interest rate slash mean for you?______________ 5
Vital financial protection overlooked by new parents _________ 6
Government pledges to support tenants and homeowners_____ 6
Could now be the right time to remortgage?__________________ 7
Mortgage packages become increasingly competitive_________ 7
Protecting your income – need to knows____________________ 8
Storm damage repair to run into hundreds of millions________ 8
In uncertain times –
we’re here for you
The housing market enjoyed Unfortunately, this rejuvenation was
fairly short-lived as the COVID-19
the ‘Boris Bounce’ following outbreak took hold in the UK and
his election victory in late across the globe. At this stage it’s
2019. This bounce provided difficult to quantify the full impact on
both the commercial and residential
some long overdue property sectors, but what is certain is
momentum in the housing that while there are many factors
involved in determining the mood and
market, a real shot in the arm, movement of the property market, few
following a fairly lack-lustre things have a bigger impact than
run. Data highlighted that uncertainty.
buyer interest in some regions Rest assured, what is certain is that
we are here to help. If you have any
jumped and activity was questions about the property sector,
reignited, a post-election mortgages or your protection
surge in buyer demand requirements – please get in touch,
we have our finger on the pulse in
certainty boosted confidence. this fast-changing environment and
can assist you to navigate the
challenges ahead.
Got a question?
If you have any questions regarding any of the topics.within this issue,
please contact us on 01244 621721 or advice@quilterpca.co.uk
02 Essentially Mortgages Q2
Spotlight on protection Keep calm and organise
your finances
At the present time, it’s hardly
surprising that many of us are
The coronavirus outbreak has Don’t make assumptions feeling stressed about our
According to Royal London’s2 State of financial wellbeing. A good way
hit businesses across the UK, the Protection Nation report, just 11% of reducing stress is to take
leaving many individuals and of people believe they’re likely to go on stock of your finances, so why
not embark on a spring clean?
families in a precarious sick leave for more than three months.
However, it also revealed that the A survey3 found that 45% of
financial position. The crisis actual probability of this is much people cite money as their main
has shown that financial higher, at 26% for men and 37% for cause of stress (rising to 66% of
hardship can strike when we women. Conversely, a fifth of those with no savings or
respondents believe they’re likely to investments). Improving your
least expect it, demonstrating die during their working lives, even financial outlook could therefore
the importance of protection though the probability of this is actually help to lessen your anxiety.
cover. much lower (4% and 3% for men and
Remortgaging could pay
women, respectively).
Although billions have been pledged to The Bank of England (BoE) has
support employees and businesses, It’s therefore unwise to make slashed its base rate to an all-time
some have slipped through the cracks assumptions about your need for low of 0.1%. Although those on
of eligibility criteria. For others, the protection cover. Critical illness and tracker rate or variable rate
help is inadequate. income protection cover could be just mortgages will see their payments
as valuable as a life insurance policy. reduce, those on fixed rate deals
A financial lifeline won’t see any benefit.
A weight off your mind
Never have we been so starkly
reminded of the need for the safety If you’re unable to work due to illness Since the base rate cut, lenders
net of protection cover. A recent or injury, financial worries could hinder have withdrawn over 2,000
YouGov1 survey about the pandemic, your recovery. Get in touch to chat mortgage products from the
revealed that nearly a third (32%) of about the best protection options for market, due to the risk of lending
Brits currently fear for their future. your individual circumstances. in the current climate. However,
Cover such as life insurance, critical YouGov, 2020
1 there are still deals to be found
illness cover and income protection Royal London, 2019
2 and with rates this low,
can help lessen the blow of remortgaging could save
unexpected events. Note that some you money.
policies have qualifying periods that Do you have adequate
may rule out claims made within a protection cover?
certain period of taking out the policy financial hardship It’s also a good time to consider
or of becoming too ill to work.
can strike when we how you and your family would
cope if you were to suffer illness,
least expect it loss of income or unemployment.
First, you should check whether
your existing cover remains
adequate for your needs.
You could also ask yourself
whether there is any other
protection cover you might need,
for example life insurance, critical
illness cover, income protection or
professionally advised payment
protection insurance (PPI).
Talk to experts
It’s particularly important to take
financial advice at the moment
because things are constantly
changing. Talk to us for up-to-date
guidance on the best options
for you.
3
BlackRock, 2020
Essentially Mortgages Q2 03
The Budget – housing news
In March, Chancellor Rishi expected to affect 70,000 of the Days after the Budget, the Chancellor
UK’s total 1.2 million annual said main lenders had agreed to offer
Sunak’s debut Budget tackled property transactions. three-month mortgage repayment
the COVID-19 outbreak by Other housing measures include a 1%
holidays for borrowers impacted by
COVID-19 and the BoE announced
announcing a fiscal stimulus cut for local authorities in interest
a further base rate cut to a
and support for the NHS rates for social housing, an extension
lowest-ever 0.1%.
of the affordable homes programme
and businesses. Housing (£12.2bn funding), a £1.1bn allocation
was not a primary focus of from the Housing Infrastructure Fund
to build 70,000 new homes in high-
the Budget, but there was an demand areas and funding to remove From 1 April 2021
announcement of a new tax unsafe cladding. non-resident buyers
for those buying property The Chancellor also announced that of homes in England and
from overseas; whilst a Robert Jenrick, the Secretary of State
Northern Ireland will have
for Housing, Communities and Local
synchronised Bank of Government, would set out to pay a 2% Stamp
England base rate cut of 0.5% comprehensive reforms to overhaul Duty Land Tax surcharge
held significance for some Britain’s planning system. The reforms
were announced the following day with
mortgage rates. the aim of simplifying the planning
From 1 April 2021 non-resident buyers system and improving the capacity,
of homes in England and Northern capability and performance of Local
Ireland will have to pay a 2% Stamp Planning Authorities (LPAs) to
Duty Land Tax surcharge; this was accelerate the development process.
reduced from the 3% surcharge The Budget received some criticism
previously outlined in the Conservative from housing industry experts who
election manifesto. The Chancellor have expressed disappointment in the
intends to use the money raised from lack of new initiatives to help first-time
this tax to fund 6,000 new homes for buyers, replace Help to Buy, or reform
homeless people. The measure is Stamp Duty.
Should I write my life
insurance in trust? Writing your life insurance policy in
trust also ensures that under current
When taking out life insurance,
HMRC rules and in most circumstances,
you’ll want to set it up so that your
the policy proceeds on death will not
heirs receive as much as they can,
form part of your estate for Inheritance
as quickly as possible when it pays
Tax purposes.
out. Writing your policy in trust is a
great way to do this. Another benefit is that the policy
A trust is a straightforward legal proceeds can be paid directly to your
arrangement which allows you to leave beneficiaries, without having to go
assets to the people you want to through probate. As probate can be a
benefit – the beneficiaries. A trust is lengthy process, with any Inheritance
managed by a trustee, or trustees, until Tax having to be paid before probate
the time comes for the benefit to be can be granted, having a trust allows
paid out. your beneficiaries faster access to the
policy proceeds.
Benefits of a trust
Talk to us
A trust gives you greater control over
where your assets end up and is If you would like advice about putting
especially important if you’re not your life insurance in trust, talk to us.
married or in a civil partnership. We can guide you through the process.
04 Essentially Mortgages Q2
Equip yourself
– be scam smart
400
reports of scams had increased by
%
New figures from Action Keep your cash where you can
see it
Fraud have shown that The government has released advice5
fraudsters are taking to help you keep yourself and your
advantage of people’s money, safe from fraud. This includes
checking the company’s credentials via
fears at this vulnerable time a reliable source such as the FCA’s
to get hold of their hard- Financial Services Register, not clicking
earned money. on links from unknown senders, being
wary of deals that sound too good to
The national fraud reporting centre be true, not giving out personal details
said that reports of scams had and seeking professional financial
increased by 400% in March4, mostly advice before making any decisions.
due to a sharp increase in online
shopping scams centring around the Guidance in uncertain times
sale of personal protective equipment Anxiety and stress can make us more
(PPE) or hand sanitiser, which vulnerable to fraud, so make sure you
subsequently failed to arrive. come to us before making any big
financial decisions. We’re here to keep
Other types of scam reported included
you and your finances safe during this
phishing, investment fraud and lender
period of uncertainty.
loan fraud.
4
Action Fraud, 2020
5
GOV.UK, 2020
What does the interest
rate slash mean for you?
The BoE’s aim was to shore decrease, meaning that it could be a
good time to remortgage.
up the economy. Lower
The financial losers
interest rates help this goal by
While it may be beneficial for some to
encouraging consumers to remortgage, other groups may
spend and invest, but make struggle to find a deal. This is because,
saving less attractive. But since the interest rate cuts were
announced, lenders have pulled over
what does the change mean 2,000 products off the market6 due to
for you? their perceived level of risk in the
current climate – many of them
The financial winners catering to first-time buyers or those
People on certain types of mortgages, with small deposits.
primarily tracker rate and variable rate
mortgages, will benefit from lower Savers, who have struggled against low
interest rates. This is because each rates for many years now, face even
monthly payment varies in line with the grimmer prospects. Those saving for
BoE base rate. Those looking to deposits or looking to build up their
remortgage will also feel the financial nest eggs face a much slower journey
benefits. It is likely that new fixed-rate towards their goal.
mortgage products will see their rates 6
Moneyfacts, 2020
Essentially Mortgages Q2 05
Vital financial Government pledges
protection overlooked to support tenants and
homeowners
by new parents
As the coronavirus pandemic has
tightened its grip on the country,
the reality of its effect on people’s
livelihoods has become clearer.
However, help is at hand, with the
According to recent research7 in ten parents-to-be have started a government announcing a
savings account for their baby, little support package to help people
the average expenditure by more than a quarter (27%) have taken stay in their homes.
couples becoming parents for out life insurance.
Homeowners who have taken a hit
the first time has increased by Add financial protection to your list to their income due to the
more than 18% since the same of essentials outbreak will be able to apply to
their lender for a three-month
survey was first conducted in It’s important to consider what could
mortgage payment holiday, giving
happen if you weren’t able to provide
2012 and now stands at for your family; so that your little one them the reprieve they need to get
£1,645. This is the equivalent would stay safe, be well cared for and through the worst of the crisis
without the risk of defaulting on
of more than £469m a year have a roof over their head if you were
their loan or having their home
no longer here.
across the UK. repossessed. The payment holiday
Get protected applies to both owner-occupied
Protecting your new arrival
Taking out life insurance doesn’t have and buy-to-let mortgages.
and family
to be complicated. Come to us for Meanwhile, the notice period a
Essential items on your list will
sound advice on finding the most landlord must give a tenant before
obviously be things like prams, cots
suitable life insurance policy for your commencing eviction proceedings
and car seats. However, preparations
for the new arrival do not always circumstances, giving you ultimate has been extended until 30
peace of mind. September 2020. This means that
extend to important long-term
even if you are in rent arrears due
financial planning. Although around six Aviva, 2020
7
to coronavirus-related financial
difficulties, you will not be evicted
from your home.
06 Essentially Mortgages Q2
Could now be the right
time to remortgage? Mortgage packages
become increasingly
Following the Bank of or so should assess their options. competitive
Some lenders, particularly more
England’s massive base rate specialist mortgage providers,
Things may seem challenging right
now, but there is good news to be
slash to a record low of 0.1%, have increased rates to protect found. Mortgage packages have
mortgage rates have also their position. become increasingly competitive
fallen. For those whose Lenders already pulling products as we’ve moved through the early
months of 2020.
mortgage deal is nearing its Lenders have also responded by
withdrawing deals from the market, According to money comparison
end, or borrowers currently mostly those in the higher loan-to- experts Moneyfacts8, true rates
on their lender’s standard value range. Over 1,500 mortgage (reflecting initial rate and product
fee) on two and five-year fixed
variable rate (SVR), it could products have been withdrawn from
rate mortgages on offer from
the market since the base rate cut.
be an excellent time to find a the UK’s top ten lenders fell by
Move now
cheaper deal. up to 0.14% between January
If you’re on a tracker rate mortgage, and March.
With some competitive products out sit tight and enjoy the effect of It’s important not to be swayed by
there, you could be in line to save a lot lower interest rates on your low rates alone, fees need to be
of money – if you move quickly. monthly repayments. considered and the small print
Things could change rapidly If you’re on a fixed rate deal or your reviewed – we can find the most
In such a fast-changing environment, lender’s SVR, however, consider moving suitable mortgage for you.
those who are considering now while competitive deals are still on 8
Moneyfacts, 2020
remortgaging in the next few months the market.
Essentially Mortgages Q2 07
Protecting your income
– need to knows
Storm damage repair to
run into hundreds
of millions
In February, a series of storms
ripped through the country,
leaving a trail of damage in their
wake. The Association of British
Insurers (ABI)9 estimated that
insurance payouts to repair
damage to homes and businesses
will exceed £360m.
Some 82,000 people put in claims
for flood or wind damage in the
wake of the destruction wrought
by Storms Dennis and Ciara. The
average claim per household
affected by flooding was
estimated to be around £32,000.
Many people miss paying 12 or 24 months, whereas income Bad weather events on the rise
protection plans provide cover up
their rent or mortgage to retirement age
According to Aon, the total
economic damage worldwide
because illness or injury caused by floods topped $82bn in
– Waiting period – the length
prevents them from working. of time you’d be off work before 2019 – but just $13bn of that was
If the only money you have the policy starts paying out. The insured10. Events such as these
are becoming increasingly
coming in is sick pay and shorter this period, the higher
frequent, with the uninsured
the premiums
possibly state benefits, it’s facing devastating financial losses.
– Parent cover – cover for if you
easy to see how it might It’s not just flooding that’s on the
need to take time off to look after a
become difficult to pay what dependent child
rise. The ‘Beast from the East’ that
blasted across the UK in early
is likely to be your largest – Death benefit – included in 2018 resulted in a £194m payout
monthly outgoing. some policies. for burst pipe damage alone.
Income protection insurance has a vital What else do I need to know? Don’t leave it to chance
role to play as it can provide funds if Nowadays, it is becoming more
Premiums will depend on factors such
you are forced off work due to illness and more unlikely that ‘it’ll never
as your age, health and the type of
or accident. happen to me’. Natural disasters
work you do.
Arrange a plan to suit your own needs can cause serious damage, with
One insurer recently stated, repair work likely to run into
– Monthly cover – the higher the ‘We don’t exclude coronavirus from thousands of pounds if you are
cover, the more expensive your any of the policies,’ but ‘We’ve added uninsured. Contact us and we can
premiums will be. There is a some new questions about coronavirus help you find the best policy to
maximum cover level of around that you’ll need to answer if applying for protect your home, possessions
60% of earnings after tax and finances.
a new policy.’ Ask for the latest
– Payment duration – accident and information about coronavirus and 9
ABI, 2020
sickness policies typically pay out for income protection. 10
Aon, 2020
08 Essentially Mortgages Q2
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