News

What an election may mean for your finances

We look at the possible outcomes for tax, pensions, savings and property under a new government

Carol Lewis, September 7 2019, 12:01am,

The Times

There is a much-cited dictum that people vote with their wallets. Hence politicians tend to focus on personal finance — income tax, stamp duty and pensions — in the lead-up to a general election.

Within the next day or two we could learn the likely date of the next election. However, with politicians short of time and their attentions focused on other matters, the party manifestos are likely to be more piecemeal than usual.

Steve Webb, the director of policy at Royal London, an insurer, says: “If a new government ends the uncertainty over Brexit, one way or another, this could improve the economy and investment returns. But if it mishandles Brexit, there could be serious economic consequences for people’s wages and investments.”

So how will an election hit our wallets?

Interest rates
While rates are widely expected to plummet to offset a no-deal Brexit, a key consequence of a Labour win could be the opposite. Webb says: “If a Labour government was expected to borrow heavily, this could lead to a sharp increase in interest rates.”

This might be good news for savers and those buying annuities, but bad news for those with mortgages. Webb says: “Higher interest rates would also reduce deficits in company pension funds.”

Income tax
During his campaign to become the Tory party leader Boris Johnson pledged to raise the threshold for higher-rate income tax in England from £50,000 to £80,000. At present 40 per cent tax is levied on income of between £50,000 and £150,000. Scotland and Wales set their own tax bands. This policy would not be all good news for higher-rate taxpayers because they could lose tax relief on their pension savings.

Steven Cameron from Aegon, an insurer, says: “An increase to benefit higher earners will be partly offset by a proposed increase in national insurance contributions and the loss of higher-rate tax relief on pension contributions.”

Webb believes that “other, less high-profile tax rises” could be introduced to pay for the tax cuts.

If Labour won an election, Webb says: “Labour has a radical policy agenda, which would seriously dent the incomes of the wealthy. Labour has talked about increases in income tax for higher earners, increases in corporation tax, increases and reform of inheritance tax, and increases in capital gains tax.”

Labour has proposed that the 45 per cent additional income tax rate will kick in at £80,000 rather than £150,000 with a 50 per cent rate to apply to income over £123,000.

Pensions
The Conservatives have promised to look at the pension tax rules for higher earners after it emerged that NHS workers were cutting their hours to avoid paying more tax.

The tapered allowance — which whittles down the amount you can save tax-free into a pension once you earn over £150,000 from £40,000 a year to £10,000 — is particularly unpopular. Cameron says: “The pension lifetime and annual allowances are a disincentive to work and we need action across the board, not only for the NHS.”

Labour has indicated that it might reduce pension tax relief, while the Liberal Democrats have said that they would introduce a flat 20 per cent rate of tax relief on pension contributions and abolish employee national insurance payments on the contributions.

Housing
Private landlords haven’t had it easy under the Conservatives, but they are unlikely to fare any better under a Labour government.

George Bull, a senior tax partner at RSM, an accountancy firm, says: “John McDonnell’s recent suggestion that a Labour government would give private tenants the right to buy their homes at a discount is causing consternation, coming hard on the heels of Conservative government restrictions to the tax regime for private landlords.”

The Conservatives have hinted that they could look at reforms to stamp duty and greater incentives for first-time buyers, including an extension to the government’s Help to Buy scheme and a continuation of its Lifetime Isa (Lisa). The Scottish National Party said that it would abolish “gimmicks” such as the Lisa.

POSSIBLE POLICIES

Conservatives
• Raise the 40 per cent income tax threshold from £50,000 to £80,000
• Replace the pension triple lock (which states that the basic state pension will rise by a minimum of either 2.5 per cent, the rate of inflation or average earnings growth) with a double lock (inflation and earnings) from 2022
• State pension age to increase to 67 by 2028 and 68 by 2046
• Reduction in pension tax relief for high earners
• Means-tested winter fuel payments

Labour
• The 45 per cent additional income-tax rate threshold to be lowered from £150,000 to £80,000
• A 50 per cent tax rate to apply to income of more than £123,000
• Freeze state pension at age 66
• Keep the pension triple lock until 2025
• Add 20 per cent VAT on private school fees
• Give private tenants the right to buy their homes at a discount*
• Large businesses to transfer up to 10 per cent of shares to a fund held by employees*

Liberal Democrats
• Limit the tax-free lump sum that can be withdrawn from pensions to £40,000
• Keep the triple lock on pensions
• Flat rate of tax relief on pension contributions of 20 per cent
• Abolish employee national insurance on pension contributions
• End winter fuel payments for higher-rate taxpayers

Scottish National Party
• Opposed to lowering income tax thresholds for higher earners
• Have pledged to campaign to keep the pensions triple lock
• Opposed to an increase in the state pension age beyond 66
• Extend eligibility of winter fuel payment to families with severely disabled children
• Business rate exemption on private schools to be lifted

 

 

House price growth is slowing but buying still beats renting

Louisa Clarence-Smith, Property Correspondent

August 20 2019, 12.01am

The Times

 

The era of dizzying rises in the price of property may be over but research suggests that owning a home still makes more financial sense than renting because of low mortgage interest rates.

The monthly cost of paying the interest on a new mortgage is now 62 per cent lower than renting, according to Capital Economics, a research consultancy. It found that the average monthly rent for a property was £859, compared with the £323 average monthly interest on a new mortgage.

In comparison, between 2010 and 2018, the average interest on a mortgage was 55 per cent lower than the average rent. Paying the interest on a mortgage in the 2000’s was only 27 per cent cheaper than paying the rent.

Hansen Lu, an economist at Capital Economics, said: “The era of sustained, rapid house price growth appears to be over. But even so, the cost of owning a home is still favourable compared with renting and is likely to stay that way. That suggests that the strong preference that households have for owner occupation will be sustained.”

House price inflation has slowed since the Brexit vote in 2016 as a result of price falls in and around London, particularly for more expensive homes affected by higher stamp duty. Government figures this month showed that in the year to June house prices across the country rose by 0.9 per cent to an average of £230,000, the weakest growth rate since 2012.

Brexit uncertainty is weighing on the housing market, with property sales at their lowest level since the global financial crisis, according to Savills, an estate agency.

The Bank of England has forecast that house prices could fall by as much as 30 per cent in the event of a chaotic no-deal Brexit.

However, Mr Lu said that while a collapse in house prices or a steep rise in interest rates could make buying a home much less attractive in the short term, there remained a “big picture” case for buying over renting.

Capital Economics said that mortgage payments had fluctuated broadly in line with rents over the past decade.

Most borrowers fail to qualify for comparison site mortgage deals

Kate Palmer

August 18 2019, 12:01am

The Sunday Times

Fewer than four in 100 people looking for a mortgage are actually eligible for the deals found by comparison websites, research for The Sunday Times shows.

Analysis of searches made by 11,000 borrowers shows that just 385 — or 3.5% — would qualify for the mortgages they are shown.

Many comparison websites have a simple calculator for borrowers that asks for the property value, size of deposit and loan length. They then see a list of available deals that fit these criteria — but the loans will depend on lenders’ affordability tests, which scrutinise expenses such as gym memberships, private school fees and spending on credit cards.

The credit reference giant Experian found that only a tiny number of people will actually be eligible for these deals, which represent about 73% of available mortgages. They exclude niche products, such as home loans only available through brokers or offered by private banks.

Homebuyers who fail to pass the tests are either declined outright or offered less money than hoped for.

Borrowers have more luck if they use an eligibility tool, where they input salaries, spending commitments and debts. Experian said 22% of borrowers would qualify for the deals found this way.

Some websites, such as Compare the Market, offer even more detailed eligibility checks, which include a search of the borrower’s credit profile. These are time-consuming to complete, but mean that borrowers are more likely to be accepted for any of the deals they see.

Lisa Fretwell, from Experian, said: “People don’t want to leave anything to chance when buying their dream home — they want to find affordable mortgages they will be accepted for.”

Help to Buy continues to grow and could be extended beyond 2023

The number of homes bought through the Government’s flagship Help to Buy scheme increased by 9% in the 12 months to March 2019 with the figures also rising for first time buyers.

The data published by the Ministry of Housing, Communities and Local Government (MHCLG) show that 52,404 home sales were completed under the scheme during the 12 month period, the first time it has reached over 50,000 in a year.

Some 43,248 of these homes were bought by first time buyers using the Help to Buy scheme, a rise of 11% year on year, dispelling the myth that it does not help those taking their first step on the housing market.

In London there were 6,115 purchases using Help to Buy, up 30% year on year and first time buyers made up 95% of sales in the capital, some 5,838 homes.

The average price of properties bought through the scheme across England reached £300,487, up 4% from £288,462 at the same point in 2018.

Since it was launched in April 2013 some 221,405 homes have been bought using the scheme with 81% of them going to first time buyers. The mean purchase price of a property bought under the scheme since the start was £260,218, with buyers using a mean equity loan of £56,257.

Help to Buy offers buyers who have a deposit of 5% an interest free Government loan of up to 40% of the purchase price of new build homes in London and 20% in the rest of the country.

Now it could be extended beyond its current end date of 2023. The newly appointed Secretary of State for Housing, Robert Jenrick, said it will be considered. ‘This is a new administration, a new Chancellor, I think all options are on the table. I intend to have further discussions with Sajid Javid in the weeks and months to come,’ he said.

 

PropertyWire

26^th July 2019

 

 

Mortgages: switch now to cut your payments

Homeowners could save £200 a month thanks to competitive rates and higher prices, says lender

Rupert Jones 

The Guardian

Sat 20 Jul 2019 07.00 BST Last modified on Mon 22 Jul 2019 10.58 BST

More than £26bn worth of mortgage deals are due to mature in October, the largest monthly volume of the year, according to new figures released this week.

So if one of those thousands of home loans is yours, you might want to start thinking about looking for a new deal now – particularly as you may be able to make a chunky saving on your monthly payments.

Yorkshire building society – which came up with the figure after analysing market data – says some homeowners whose deals are coming to an end this autumn could save about £200 a month by remortgaging.

That is partly as a result of the current competitive mortgage rates, but also reflects the rise in house prices across much of the UK during the last few years.

Mark Harris at mortgage broker SPF Private Clients says: “Those coming off five-year fixes will find that rates are now considerably cheaper, which should mean you can make a significant saving on your monthly payments.”

He adds: “You may also find that your property has appreciated in value, meaning you qualify for a lower, cheaper, loan-to-value [LTV] band.”

Official Land Registry data shows that the average UK house price in October 2014 was £191,855, and had risen to £229,431 by May this year (the latest month for which figures are available) – an increase of just under 20%.

The Yorkshire says a homeowner who initially borrowed 85% of a £200,000 property in October 2014 at a market-average five-year fixed rate of 4.25% could benefit from a lower LTV of 65% and take advantage of the society’s two-year fix priced at 1.54%, which would save £201 a month in repayments. (However, this deal does involve paying a £1,495 product fee).

If you want to take out a five-year fix, decent rates now available for those remortgaging include:

• 1.77%from Skipton building society, where you can borrow up to 60% of the property’s value, with a £1,995 product fee
• 1.94%from Platform up to 60% LTV with no product fee
• 1.83%from Barclays up to 75% LTV with a £999 product fee

Often with remortgages, the lender will throw in a free valuation and/or free legal services.

Harris says if your mortgage deal is coming to an end, be prepared. “Speak to a mortgage broker a few months beforehand, though if you have a broker, they should be getting in touch with you. If you are looking for extra cash for home improvements or debt consolidation, you should mention this so it can be factored into the sums.”

People need to make sure they consider all the options available. “Your existing lender may be in touch offering another deal for you to slip on to, but make sure you compare this with what else is on the market rather than assuming it is the best option for you,” he adds.

Nick Morrey at broker firm John Charcol says remortgaging to a new lender is likely to be the cheapest option, since the likelihood of your existing lender offering you a product that is also the cheapest of all that are out there is slim. However, the latter route will be quicker than a remortgage, as it will not involve any underwriting or legal work.

“If your current product expires in October, you have approximately three months to tee up a remortgage, should that be the best option. Given that it takes on average up to two weeks to get an offer of advance from the new lender, and four weeks for the legal work to be done, this should be enough time to have everything in place to go the day after your current deal ends, he adds. “Considerable savings can be made compared to the deals available this time in 2014.”

According to Harris, if you have savings earning next to nothing in interest but you want to hang on to them rather than paying down the mortgage, it may be worth considering an offset home loan. These mortgages link your savings, and in some instances your current account, to your home loan.

“This will enable you to reduce the interest you pay while still retaining access to your savings in case of emergency.”

Meanwhile, Kevin Roberts, a director at Legal & General Mortgage Club, says a competitive mortgage market and slower house price growth are helping more first-time buyers make home ownership a reality.

However, he points out that HSBC found that people now expect to be on average 39 years old before they buy their first home. “There are clearly still challenges facing people trying to take their first step, particularly if they don’t have the support of a Bank of Mum and Dad.”

Banks are approving more loans, rates are low and there’s even an option where you don’t need to borrow

Marc Shoffman

July 6 2019, 12:01am, The Times

• Housing market
• Banking
• Economics
• London

 

First-time buyer mortgage approvals are on the rise, but many people are still struggling to get on to the property ladder because of demands for high deposits and wages.

Lenders approved 7.8 per cent more mortgages for first-time buyers in April compared with the same month last year, according to UK Finance, the industry trade body.

The average interest rate on a typical 90 per cent loan-to-value (LTV) two-year fixed rate mortgage is 2.65 per cent, compared with 2.73 per cent in July 2018, according to Moneyfacts, a data company. The average rate on a 95 per cent LTV mortgage over the same period has fallen from 4.04 per cent to 3.25 per cent.

Five-year fixed rates have also fallen. The average five-year fixed rate mortgage at 90 per cent LTV is 3.02 per cent, compared with 3.2 per cent this time last year, while 95 per cent LTV deals have dropped from 4.37 per cent to 3.64 per cent. “For those who can afford it, there is a plentiful supply of mortgage deals on the market that have been tailored to suit the needs of first-time buyers,” says Rachel Springall of Moneyfacts.

Deposit differences
Mortgage rates may be low, but raising a deposit can still be difficult for first-time buyers. There are still big regional variations in house price inflation, which affects requirements and the size of deposit needed. Research by Zoopla, a property portal, found that the average deposit first-time buyers need to purchase a property in one of the UK’s main cities is £38,418, but can range from £18,449 in Liverpool to £119,000 in London.

New mortgage borrowers are benefiting from falling prices in the south, according to Zoopla, particularly in London where prices fell 0.4 per cent in the 12 months to May.

This drop means the average annual income required to buy a home has also fallen to £84,000 in London, which Zoopla says is the lowest in four years. In contrast, rising prices in cities such as Manchester and Leicester have pushed the average income needed to buy up by 19 per cent and 20 per cent respectively. Richard Donnell, research director at Zoopla, says: “While affordability in London has improved, first-time buyers will still need to earn more than three times the minimum income required to buy in Liverpool.”

Is now a good time to buy?
Mortgage brokers insist the market is ripe for first-time buyers despite uncertainties such as Brexit.

Joshua Gerstler, director of the Orchard Practice Financial Services, an adviser, says: “We always think that it is difficult for first-time buyers and that people had it much easier ten years ago. Then a decade goes by and they realise they were lucky to buy their first property when they did.

“If you are buying a home for the long term, Brexit should not have any influence on your decision.” Jane King from Ash-Ridge Private Finance, a mortgage adviser, says: “With interest rates low, lenders wanting to lend and a slight relaxation of criteria in the past year or two means now would be a good time to buy, especially with prices falling in some parts of the UK.”

Best buys
NatWest is offering the lowest rate on the market for a two-year fix at 1.38 per cent with a £995 fee, but you will need a 40 per cent deposit. Skipton Building Society offers a market-leading five-year fixed rate of 1.77 per cent with a £1,995 fee also at 60 per cent LTV. Yorkshire Building Society offers a 90 per cent LTV two-year fixed rate at 1.79 per cent with a £1,495 fee.

Some lenders are offering zero- deposit deals. Barclays relaunched its Family Springboard mortgage in May, which lets homebuyers borrow deposit-free at 2.95 per cent over five years as long as a family member or friend puts 10 per cent of the property value into a savings account as security.

First-time buyers can also get on the ladder through the government’s shared-ownership scheme, where you take out a mortgage for a share in the property that you own (usually between 25 and 75 per cent) and pay rent on the rest. Another option is the Help to Buy equity loan scheme, which provides a 20 per cent government loan (40 per cent in London) to those with a 5 per cent deposit to put towards the purchase of a new- build property.

The government has confirmed this week that the scheme will run until at least 2021.

King says that first-time buyers can get good deals with a 10 per cent deposit. “Don’t just look at the headline rate. Buyers should also consider added fees and charges and whether these are refundable if the sale falls through.”

She adds: “They should also check specifically that the lender will agree a loan for the type of property that they want to buy.”

 

 

Cheaper mortgage rates for new buy-to-let landlords

The week Barclays joined the slew of lenders cutting rates on buy-to-let mortgages.

Buy-to-let mortgage rates are tumbling as lenders unveil cheap deals in a bid to keep landlords in the market.

Figures released by Mortgage Brain, a platform used by brokers, show the average 40%-deposit tracker mortgage is 3% cheaper than it was three months ago, and a 30%-deposit tracker deal is 2% cheaper than in March. This means a landlord taking out a £150,000 mortgage would save £234 a year with a 40% deposit and £144 a year with a 30% deposit.

On Thursday, Barclays joined the slew of lenders cutting rates, including a reduction from 1.59% to 1.55% on its two-year fixed-rate deal to landlords with a 40% deposit. It also cut its 1.88% five-year fix to 1.83% with a minimum 25% deposit.

This followed moves by Halifax on Tuesday, which cut buy-to-let rates on some deals by 0.45 percentage points, and by Nationwide, which trimmed rates on its broker-only products.

Over the past two years, landlords have had to adjust to stricter lending criteria, as well as the phasing out of tax relief on mortgage interest payments by April 2020.

“The buy-to-let market has taken a real hit — there simply is not as much interest from landlords as lenders have been used to over the years,” said Aaron Strutt of broker Trinity Financial .

Lenders have been targeting the buy-to-let remortgage market to drum up some business and, incredibly, they keep cutting rates to tempt landlords in.”

There are also a record number of deals available to new landlords, a sign that lenders are targeting first-timers into the rental market.

There are 1,405 first-time buy-to-let mortgages, up from 645 in 2014, according to Moneyfacts, the price comparison website. The average rate for a two-year fix has plummeted from 4.01% in 2014 to 2.97% this month.

“Entering buy-to-let hasn’t been without its hurdles,” said Rachel Springall of Moneyfacts. “Rules designed to tighten lending don’t seem to have shaken up attitudes to attract first-time landlords.”

The Sunday Times

July 7 2019 12.01am

Why income protection is important in your 20s and 30s

It’s easy to dismiss income protection as something you’ll need later in life when age-related illnesses and conditions become more prevalent. However, recent statistics from healthcare and protection insurer, The Exeter, show an increase in the number of people claiming for income protection in their 30s.

Income protection not only protects you and your family if a physical condition means you can’t work, but it also pays out if you suffer with mental ill health. In 2017, mental health was the most common cause of claim on income protection policies in the UK, according to the Association of British Insurers.

Big life events are often a trigger for people to think about their cover.

Here, Peter Hamilton, head of retail protection at Zurich, reveals why you should consider income protection and other types of cover as you reach major life milestones.

Buying a house

It goes without saying that anybody buying a house should protect their home and the ability to make monthly mortgage payments against the risk of being unable to work.

Income protection cover provides monthly replacement income if somebody is unable to work because of long term illness or injury while a critical illness policy would provide a one off lump sum payment if a customer is diagnosed with a number of illnesses covered by the policy.

As well as the financial benefits of cover, most income protection policies provide speedy access to treatments such as counselling or physiotherapy to help people recover and ideally get back to work.  Critical illness policies also usually offer additional support services including access to counselling and advice on anything from sourcing childcare to money management.

This is especially important where people have no savings to act as a buffer to help with life’s ups and downs.

A recent Zurich report showed that despite more than half of UK adults having had unplanned leave from work including sickness or injury, they had no financial provision in place in case it happened again.  One in eight admitted they would need to sell their home if they lost their income, one in six reported having no disposable income and a quarter had no savings.

It’s also worth noting that there is still a misconception out there that renters don’t need protection but ultimately, if people are unable to work through illness or injury, the bills still need to be paid if tenants want to remain in their homes.

Getting married

Tying the knot is another trigger for investing in some sort of protection cover and the same goes for couples choosing to cohabit as married.

It’s important to think about it where partners are dependent on each other for splitting their outgoings. If one were to be hit by unexpected illness, having protection in place could mean the difference between staying in their home or having to sell up and/or move.  In the worst case scenario, if one half of the partnership were to die, having life insurance would lessen the blow – at least financially – for the remaining partner.

Interestingly, Zurich analysis has shown that more than 2.4 million cohabiting families across the UK (or 73 per cent) – the fastest growing family type in the country – do not have life insurance, potentially leaving their relatives open to financial problems once they pass away.  This compares to 56 per cent of married couples.

Having a child

Each year, we pay out millions of pounds in claims to customers and their families whose lives have been turned upside down by illness and worse still, by the loss of loved ones.  Income protection and critical illness can help to provide financial support for those affected by illness or injury, while life insurance means that financial support is in place for children and any dependents left behind.

Some critical illness policies also include children’s cover as an additional feature and will pay out up to around £25k if they are affected by a range of illnesses covered by the policy.  This can help families with any financial impact such as having to take time off work or help pay towards treatments or any changes that have to be made to the home.

Written by:Joanna Faith at YourMoney.com

17/06/2019

Joanna is an award-winning journalist with more than ten years’ investment and personal finance experience. She is editor of YourMoney.com.

Help to Buy or a Lisa? You should have both

Marc Shoffman outlines the differences between the schemes and how you can get two bites of the savings cherry

Marc Shoffman, The Times

June 21 2019, 5:00pm,

The government’s tax-free savings schemes, aimed at helping younger people to save or get a foot on the property ladder, have been a big hit. Almost 300,000 people have opened a Lifetime Isa (Lisa) since the accounts were introduced in 2017, and a similar number have bought homes using a Help to Buy Isa over the past three years.

Both schemes let you use your Isa allowance to build a tax-free savings pot, with the government chipping in a 25 per cent bonus. But which is better if you want to buy a home? Help to Buy Isa’s close to new applicants on November 30, so should you grab an account before they disappear? We compare the two schemes.

How much can you save?
You can save up to £4,000 each year into a Lisa to put towards a house deposit or retirement, until you are 50. The government will add a 25 per cent bonus to your savings once you have held the account for at least 12 months, up to a maximum of £1,000 a year. You can use your Lisa to buy a property anywhere in the UK up to the value of £450,000. If you use it for any other purpose than retirement or buying a house you pay a penalty that effectively forfeits the bonus.

The Help to Buy Isa can be used only for a deposit on a first home worth up to £250,000 (£450,000 in London). You can save £1,200 in the first month and £200 thereafter. The minimum government bonus is £400, so you will need to have saved at least £1,600 before you can claim. The maximum government bonus you can receive is £3,000, for which you need to have saved £12,000.

Age restrictions
You have to be aged between 18 and 39 to open a Lisa, and you can only pay into it until 50 (or when you buy your first home).

A Help to Buy Isa can be opened from age 16. You can continue saving into the account until you buy your first home, but you only have until December 1, 2030, to claim the government bonus.

Product choices
The money you put into either scheme comes under your annual Isa allowance of £20,000. You can hold cash Isa versions of either account, but the Lisa also has a stocks and shares option.

You can’t hold a regular cash Isa and Help to Buy Isa at the same time, unless your bank or building society allows this under a single product. Help to Buy Isa interest rates are higher than those of the Lifetime Isa. Barclays is offering 2.55 per cent and you can get 2.5 per cent through Nationwide. Penrith Building Society is offering 3 per cent, but you can only manage the account in branch or by post.

The best rate on a Lisa is 1.1 per cent from Nottingham Building Society or 1 per cent with Skipton Building Society. Savings in a Lisa can be invested through an investment platform, such as AJ Bell or Nutmeg, but this is not advisable if you are looking to get on the property ladder quickly.

Holly Mackay, the founder of Boring Money, a comparison website, says: “You can open a stocks and shares Lisa and get the potential benefits of the stock market as well as the bonus, but I would not consider this unless you have at least a five-year plan because markets can be volatile in the short term.”

The bonus
This is paid at different stages of the home-buying process under the two schemes.

You can use your Help to Buy Isa savings as a deposit on exchange of contracts, but you won’t receive the bonus until the house purchase completes. You can use the bonus money to reduce your mortgage. Lisa savers get their bonus at the end of the first year and then monthly from that point onwards, so it can accrue interest. Both schemes let you put money back into the accounts if the sale falls through. You can also use the Lisa to save for your retirement and access your money from age 60, but you can only use the government bonus once.

Exit penalties
You can withdraw money from a Help to Buy Isa at any time, but if you make a contribution in the same month the total can’t exceed £200. Don’t close a Help to Buy Isa unless you’re buying a home, or you will lose the government bonus. The Lisa is more punitive. You will pay a 25 per cent charge on any withdrawals made before you reach age 50 unless you use them to buy a house. Some feel that this is unfair. Tom Selby, a senior analyst at AJ Bell, an investment manager, says: “Lowering the exit charge and scrapping the age restrictions would supercharge the Lisa for future investors.”

 So what should I do?
Savers can hold a Help to Buy Isa and Lisa at the same time, but can only use the bonus from one to buy a house with. However, you can combine your bonus and savings if you buy property with someone else who also uses the schemes.

Mackay says: “Lisa’s are great options for younger people who can afford to save up to £4,000 a year. Help to Buy Isa’s won’t get you such high bonuses, but are probably a better bet for those who won’t be able to save so much, don’t want to go near shares and who want the flexibility of possible withdrawals. If you are under 40 I would probably have both to keep my options open. The best Help to Buy Isa rates are up to 2.5 per cent, so what is there to lose? You won’t get your bonus if you withdraw, but the Lisa will pay a 25 per cent bonus.”

Marc Shoffman

The Times

 

 

MORTGAGES are often one of the greatest expenditures a person will ever make, which is why many people will be keen to find the type of mortgage which suits them the best. What is a fixed-rate mortgage?

By JESS SHELDON, The Express

PUBLISHED: 13:56, Tue, Jun 18, 2019| UPDATED: 13:56, Tue, Jun 18, 2019

When applying for a mortgage, the type that you choose will likely come down to what suits your circumstances. The mortgage types are split into two: either fixed-rate or variable. Of the latter, mortgages are split into three different categories: known as trackers, standard variable rates (SVRs) and discounts. As it may be inferred from its title, a fixed-rate mortgage has a fixed interest rate, which doesn’t change for the length of its deal.

“You’ll see them advertised as ‘two-year fix’ or ‘five-year fix’, for example, along with the interest rate charged for that period,” the Money Advice Service explains.

Deborah Vickers, channel director and financial expert at personal finance comparison site moneyguru.com, also shared some insight into this type of mortgage.

She said: “Regardless of the mortgage deal, do your research. There are so many different types of deals. “Fixed rate mortgages are great as you know exactly what your mortgage will cost, so this can help you with budgeting,” Ms. Vickers said.

“The rates on a fixed deal are normally higher than variable products and if the interest rates fall, you won’t see your payments drop. “The channel director also suggested doing some research before committing to one type of deal.

She said: “Mortgage fees can add up, so look around. If you like to budget and know what you are paying, then fixing could be a good idea. “It’s difficult to predict future of rate moves. The rates may fall, but you still have fees to pay. “It is worth checking all rates and fees when reviewing mortgage deals.”

The Money Advice Service explains that an advantage of a fixed-rate mortgage may be the peace of mind that monthly payments will stay the same for the deal period – which may help some people to budget.

It does point out though that fixed-rate deals may tend to be slightly higher than variable rate mortgages. Additionally, a borrower on this deal would not benefit if interest rates fall. It may also be that they face charges should a person want to leave the deal early.

Ms. Vickers warned borrowers about simply going for the cheapest rate, telling Express.co.uk: “When looking for something cheap, you have to be careful. When it comes to mortgages there are lots of rates and fees to watch out for.

“Something that looks ‘cheap’ and affordable monthly may come with a higher arrangement fee, a longer term, etc. You have to understand all costs associated with a mortgage product.”

Standard variable rate (SVR)

A Standard variable rate is the normal interest rate which a lender charges homebuyers, and will last as long as the mortgage, or until another mortgage deal is taken out. “Changes in the interest rate might occur after a rise or fall in the base rate set by the Bank of England,” the Money Advice Service states.

It also points out that while this may give a person freedom to overpay or leave, their rate can be changed at any time. “Each Lender has an SVR and [they] are dependent on the Lender – they can be anything from two or five or more percentage points above the base rate,” Ms. Vickers said.

“They can be cheap in some circumstances, if the base rate drops, on the reverse of this, they could go up. The main thing to consider with this is the uncertainty, you may be better to remortgage.”

Discount mortgages

A discount mortgage is where a discount is offered off the lender’s SVR, for a particular length of time. This means that the rate may be cheaper, meaning monthly repayments in that period are lower. The amount one pays may also be reduced if the SVR is cut too.

That said, it may not be preferable for some, as the lender may raise the SVR at any time, and these borrowers could be affected if Bank of England base rates rising. Other options are tracker mortgages, offset mortgages and capped rate mortgages, which could be of interest to some borrowers. When it comes to picking mortgage deals, Ms. Vickers continued: “Looking at what type of deal you want is a big choice and it is never easy. There are two distinct camps, fixed or variable.

“With a fixed you know exactly what your mortgage will cost, your payments will not change, no matter how high the rates go. The downside is that rates are normally higher than variable products.”