Month: December 2019

House prices set for new year bounce

Gurpreet Narwan
December 19 2019, 12:01am, The Times

House prices will grow twice as fast next year and rents will accelerate on the back of greater political certainty created by last week’s general election, according to a sector survey.
The Royal Institution of Chartered Surveyors said that house prices would grow by 2 per cent next year, more than double the 0.8 per cent growth rate recorded this year, while rents are expected to increase by 2.5 per cent.

The forecast backs up a similar report by Rightmove, the homes website, which is also predicting house price growth of 2 per cent next year.
Rightmove said the Conservative majority gave homeowners a “window of certainty” that will release pent-up demand for the spring selling season.

It expects the largest increases in northern England, where prices could rise by 2 per cent to 4 per cent. London and the South East will record more modest growth of about 1 per cent. But price growth would be subdued until there was greater clarity about Britain’s future relationship with the EU.

Tarrant Parsons, an economist at the royal institution, said: “Challenges around affordability and low stock levels will continue to drag on the market, and Brexit uncertainty could resurface as the next deadline draws closer. As such, we expect house prices to rise by just 2 per cent next year, with the outlook for overall sales volumes broadly flat.”
RICS said lingering uncertainty would hold down transaction numbers, with sales volumes expected to remain flat next year. According to the most recent official figures, sales fell between September and December.

Alongside the shortage of properties coming to the market, RICS noted that the number of new landlord instructions has been stuck in negative territory for 14 successive quarters.
Rents are expected to rise by an average of 2.5 per cent as a result. In London, rents are expected to rise at an even faster pace of 3 per cent.

How will the election affect your finances?

James Coney
December 8 2019, 12:01am, The Sunday Times

INCOME TAX

Currently, everyone can earn £12,500 tax-free, thanks to the personal allowance. From this level up to £50,000, income is taxed at 20%, then 40% up to £150,000 and 45% on anything more, writes James Coney.

Other restrictions apply for higher earners, the most onerous being a cut in the personal allowance if earnings top £100,000: it shrinks at a rate of £1 for every £2 earned, dropping to zero at £125,000.

Workers generally pay national insurance at 12% on earnings higher than £8,632 a year, then 2% on £50,000-plus.

Labour has promised to lower the 45% income-tax threshold to £80,000 and introduce a new top rate of 50%, payable from £125,000.

The Liberal Democrats want to raise income tax by 1p in the pound for all, making the rates 21%, 41% and 46%.

The Conservatives have backed away from Boris Johnson’s early pledge to start the 40% band at £80,000. Now they want to raise the national insurance start point to £9,500, and eventually bring it into line with the income tax threshold.

The Scottish National Party plans no additional changes to income tax (rates there range from 19% to 46% and there are more bands). However, it wants to reform VAT.

SAVINGS AND INVESTMENTS

Everyone can save £20,000 in an Isa, with tax-free returns and dividends. Most people can pay £40,000 into a pension and earn tax relief; the allowance is capped at £10,000 for top earners.

Investors can take £2,000 a year in dividends tax-free, with anything more subject to a 7.5% levy for basic-rate taxpayers, 32.5% for higher-rate payers and 38.1% for top-rate.

Individuals get a £12,000 annual allowance for capital gains tax (CGT). Basic-rate taxpayers then pay 10%, or 18% on a second home, while higher-rate payers face a 20% or 28% levy.

Labour, in effect, wants to strip back the system to just one CGT allowance of £1,000, with all further gains taxed at the individual’s marginal rate, and scrap the dividend allowance, again levying the marginal tax rate.

The Lib Dems have pledged to abolish the CGT allowance, and tax gains at marginal rates. The Tories and the SNP have made no specific proposals on capital gains or dividends.

PENSIONS

On the state pension, the biggest pledge has come from Labour, which wants to give £58bn to those women born in the 1950s who have been worst affected by rises in the qualifying age.

The party also plans to freeze the state pension age at 66 and allow workers in some jobs to claim earlier.

The SNP is against plans to lift the pension age to 68 by 2039, and wants to extend auto-enrolment to the self- employed.

Labour, the SNP and the Conservatives have all promised to maintain the “triple lock”, which links state pension rises to inflation, average earnings or 2.5%, whichever is higher. (The Lib Dems want to keep the triple lock only for people on the old basic state pension.)

The Tories and the Lib Dems have promised action on the rules that mean many high-paid NHS staff face big tax bills on their pensions.

PROPERTY

All sides have promised reforms to promote house-building. The Tories have raised the prospect of 25-year fixed-rate mortgages again, to give long-term stability to buyers. They also plan 3 percentage points extra stamp duty on overseas buyers of property. Labour would go further, charging as much as 20 points extra.

The Lib Dems want to increase council tax by up to 500% for second homes, and would levy a stamp duty surcharge on overseas buyers.

BENEFITS

Labour and the Lib Dems want to scrap the marriage tax allowance, which is worth up to £250 for some couples.

The Lib Dems would also make the bereavement allowance more generous. They also want to reinstate the widowed parent’s allowance, which could be claimed for up to 20 years, and extend it to unmarried couples.

 

The Lib Dems want working parents to have free childcare once their youngsters reach nine months. Labour has pledged to extend 30 hours of free childcare to all children aged 2-4, and would make private school fees liable to VAT.

The Conservatives want to spend £1bn on after-school clubs and other care for school-age children.

The SNP wants free TV licences for the over-75s to be maintained.

Halifax launches 2019’s cheapest mortgage, but is it worth the risk?

Halifax has fired the first shot in a winter mortgage rate war by offering a new deal with an initial rate of just 0.98%.
New two-year tracker deal offers an initial rate of 0.98% for home movers

By Stephen Maunder for Which? 24 Nov 2019

It’s the first time in a year that a lender has broken the 1% barrier, but a word of warning for borrowers – it’s a bit of a gamble.
Here, we explain how Halifax’s new deal works, and offer advice on whether now is the time to gamble on a tracker mortgage.

Halifax launches sub-1% tracker mortgage

Home movers can now get a mortgage with a rate of just 0.98%.

The new tracker deal from Halifax is available to borrowers with a 40% deposit, and comes with an up-front fee of £999. It’s only available to people moving home, so first-time buyers and remortgagers will need to look elsewhere.

Mortgage deals with initial rates below 1% are very rare, with Halifax the first lender to take the plunge this year. Last year, Skipton Building Society and Yorkshire Building Society offered 0.99% deals, as did HSBC in the summer of 2017.

What’s happening to mortgage rates?

It’s been a good year for borrowers, with mortgage rates falling across the board.
And with lenders looking to get business over the line before the end of the year, don’t rule out prices dropping further.

Right now, the average rate on two-year fix and five-year fix is the lowest we’ve seen so far in 2019. Trackers, meanwhile, are priced just 0.01% more than when they hit their 12-month low in August.

How does the Halifax tracker work?

The vast majority of borrowers take out either a two or five-year fixed-rate mortgage, but this new deal from Halifax is a tracker. Data from Experian shows that just 3.1% of borrowers searched for a tracker in October, compared with the 91% who shopped for a fixed rate.

Tracker mortgages follow the Bank of England base rate plus a percentage, so if this goes up or down, so too will your monthly payment. The Halifax deal is priced at the base rate (currently 0.75%) plus 0.23% – a total of 0.98%.

If the Bank of England increases the base rate to 1%, you’ll pay 1.23%, or if it reduces it to 0.5%, you’ll only pay 0.73%.

Should I risk taking out a tracker?

With a tracker mortgage, you’re abandoning the security of a fixed-rate deal and gambling on what’s going to happen to interest rates.
You should only take out a tracker if you expect the base rate to fall or if the deal is significantly cheaper than the equivalent fixed rate.

Is the Bank of England base rate likely to fall?

You’ve got this far without us mentioning the ‘B’ word, but there’s no way around it – the base rate could depend on what happens with Brexit. With lower-than-expected GDP forecasts in place, there has been speculation that a drop could be on the way, though this hasn’t yet materialised.

Earlier this month, the Banks of England’s Monetary Policy Committee voted to keep the base rate at 0.75% by a majority of seven to two. This means three ‘no’ voters will need to change their mind if rates are to fall when the committee next meets on 19 December.

Right now that seems unlikely, but with an election to be fought in the interim, stranger things have happened.

Is this tracker cheaper than a fixed rate?

If the base rate falls, you could end up paying 0.73% – which makes this deal far cheaper than anything else on the market. If you don’t think the base rate will drop, however, it’s probably not worth choosing this product over a two-year fixed rate.

That’s because Halifax also offers a new market-leading rate of 1.05% on its equivalent fixed-rate deal, so you’ll only be saving 0.06% – or just a few pounds a month – by choosing the tracker. And while it’s unlikely, it’s not beyond the realms of possibility that the base rate could even increase next year, which would give you a far less competitive rate of 1.23%.

You can see how Halifax’s two deals compare below.

Type of deal              Initial rate          Revert rate         Fees

Two-year tracker        0.98%                     4.24%          £999

Two-year fix                1.05%                      4.24%          £1,499

* Source: Moneyfacts. 19 November 2019. *This deal is also available with a £999 fee, subject to a higher initial rate of 1.08%

How does Halifax rank for customer service?

In our annual mortgage satisfaction survey, Halifax ranked 10th out of 25 lenders, with a customer score of 69%.
The bank scored well on its application process and online statements, but achieved middling scores in everything else, such as overpayment rules and transparency of charges.

In 2019’s survey, three providers – Nationwide, Principality and Coventry Building Society – achieved Which? Recommended provider status.
How to find the best mortgage

1. Consider your future plans: the right deal for you isn’t necessarily the cheapest one. Before making your decision, think about how long you’ll be living in the property, your finances and your appetite for risk.

2. Look at the full cost of the deal: low initial rates are exciting, but keep an eye out for other fees. High up-front fees can wipe out the benefit of a cheap rate, while early repayment charges can scupper a good five-year deal. If you’re looking at a tracker, ensure it doesn’t come with a collar that will prevent the rate getting any lower even if the base rate falls.

3. See if saving more is worth your while: mortgages have been getting cheaper across the board, but if you can lower your loan-to-value (LTV), you could make significant savings. This is especially the case if you’ve got a small deposit, with the gap in initial rates between a 90% and 95% mortgage as much as 0.7-1%.

4. If in doubt, don’t gamble: in this time of economic uncertainty, a tracker might sound tempting, but it’s still a risk. If you run a tight monthly budget and like the security of a guaranteed fixed payment each month, then it’s best to play it safe and choose a fixed-rate deal.

5. Take advice from a mortgage broker: if you don’t know where to start, a whole-of-market mortgage broker can do the hard work for you and find you a suitable mortgage. A good broker should also be able to access intermediary-only deals, which could help you save money and get a better rate.