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How Can A Lifetime Mortgage Benefit Me?

How can a lifetime mortgage benefit me?

A lifetime mortgage is when you borrow money secured against your home, provided it’s your main residence, while retaining ownership. Interest is charged on what you have borrowed, which can be repaid or added to the total loan amount. Also called equity release.

How is equity release paid when you use a lifetime mortgage?

You’ll have two options as to how you receive your money from the lifetime mortgage. It can be paid all in one go, or as a smaller initial amount with the option to receive additional 

payments (drawdowns) later on. Choosing a single cash lump sum may suit your requirements, but you’ll be paying interest on the full loan amount from day one. This approach may also affect how much tax you pay and any means-tested benefits you receive.

What are the lending criteria for a lifetime mortgage?

A number of factors will affect your eligibility for a lifetime mortgage. Typically, you’ll need to be at least 55 years old, although in some cases it’s 60. If you’re submitting a joint application, the age of the youngest person will be used. The older you are the more you’re likely to be able to borrow, and having existing health conditions might also qualify you for a larger loan.

Some providers will require your home to be worth a certain amount, usually around £70,000 or more. They may also specify a minimum loan amount, often at least £10,000.

Benefits

  • Great if your savings and other sources of income are not enough to meet your needs in retirement. For example, as you get older a lot of people require specialised care. Care costs are very expensive, and the biggest downside of moving into a care home is leaving the comfort of your home and having uncontested privacy. A lifetime mortgage is a good way of releasing equity to fund care at home. Also, another scenario is it can be used as an alternative option instead of downsizing.

Disadvantages

  • Reduces family inheritance. You will end up repaying more than you borrowed, and with an interest roll-up mortgage, this amount could be far bigger. Your beneficiaries will therefore inherit less when you die.
  • Receiving a lump sum in cash could also affect any means-tested support you’re currently entitled to.
  • The cost of interest payments added to the loan may erode all the equity in the home depending on how long you live. That’s why the minimum age for a lifetime mortgage is 55.

Summary

In my opinion, there are better options for retirement planning if you start the process early enough. Effective planning like contributing to a pension scheme while working and taking out care-related insurance products might be better long term. Therefore I stress the importance of speaking to a financial advisor for the best advice for your situation.

Written by: Manjinder Badyal

Date: 14 October 2022

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Stamp Duty Land Tax

Stamp Duty Land Tax

Stamp Duty is a tax you pay if you buy a residential property or a piece of land in England or Northern Ireland over a certain price. The price is set by the government.

The amount you are due to pay depends on when you bought the property and how much you paid for it. Stamp Duty Land Tax (SDLT) only applies to properties over a certain value.

The Chancellor of the Exchequer, Kwasi Kwarteng, announced a change to Stamp Duty rates on 23rd September 2022. The starting threshold for paying Stamp Duty has been increased from £125,000 to £250,000. Homebuyers will not have to pay stamp duty on the first £250,000 of any property purchase. The new tax tiers for amounts above the threshold will be as follows.

Stamp Duty Rates

Old Stamp Duty Rates

First-Time Buyers

This is a person who is purchasing their only or main residence and has never owned a property in the UK or abroad.

First-time buyers will pay no Stamp Duty on properties up to £425,000. For properties up to £625,000 they will pay a discounted rate. They will pay no stamp duty up to £425,000 and then 5% Stamp Duty on the amount above £425,000 up to £625,000.

For properties over £625,000 the first-time buyer would no longer be classed as a first time buyer and would have to pay the standard rates of Stamp Duty. They will not qualify for first-time buyer’s relief.   

Stamp Duty On Second Home

Those buying an additional property or a second home will pay an extra 3% in Stamp Duty on top of the standard rates. 

Written by: Nwabisa Janda

03 October 2022

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How To Achieve Successful Budgeting

How To Achieve Successful Budgeting

To be successful in most things the first step is to create a plan – as the saying goes: failing to plan is just like planning to fail! This holds true for financial wellbeing and a huge factor in your financial security is to budget. We advise everyone starts with a simple and achievable plan and in the world of money management this is known as a budget. For some this comes naturally but for others it can be a very daunting task, however it does create the stepping stones to potential savings and is especially important in the ever changing world we live in. 

1) Use real figures

A place to start when creating a budget is to use real income figures and real expenditure, allowing for deductions (like taxes) and actual spends throughout the month. This might not be quite what you were expecting when you group the spends together in categories, for example you may currently have £65 a week for food in mind when in reality this is more like £70 a week – which would actually increase your real monthly spending by £20! Also, that coffee you occasionally treat yourself to ‘once a week’ might actually amount to another £50 per month that you haven’t considered.

2) Separate ‘wants’ from ‘needs’

This is a really crucial part of your budget, and these categories range for different people. A ‘want’ is something that could make your life better but fundamentally you could live without it; however, a ‘need’ is essential for you to be able to live and work.

For example, my needs would currently include a winter coat to prepare me for the winter and forms an essential, however for others they may have one already in their wardrobe and an update for this season would fall within their ‘wants’ category.

A ‘need’ is usually a recurring expense, and we find that, in most cases needs would account for the majority of your budget.

3) Set yourself goals

Work out your short-term goals and separate those from your long-term aspirations, this can be hard to distinguish but can help in creating various savings and investment pots. It is much easier to reach your goals by identifying them in advance.

4) Allow for surprises

Who knows what unexpected events may occur, having a safety blanket of funds beneath you can really help in relieving financial anxiety. This is called an emergency fund and should only be allocated to expenses that can’t be avoided and would take pray yourself first, create a regular transaction into your savings as soon as possible after you receive your income.

5) Put your plan into action

Now you’ve got to this step, you’ve done most of the hard work and preparation to firstly understand your financial position and make improvements. You can start to implement a further savings plan to reach those goals you’ve set for yourself. If one of your goals was to spend less on food, consider preparing your lunches in advance so you won’t be tempted to spend during the week when you’re out and about. 

5) Put your plan into action

We’re all humans and make impulsive decisions from time to time, however, don’t let this put you off managing your budget. If that one night out you had has consumed the entirety of your entertainment budget for the month then making a plan to cut back on other things may alleviate future strain. The main point in maintaining a budget is to do this over and over again and it’ll eventually become a habit – you may even learn to love it. Time is your friend, and the more consciously you treat your money, the better you’ll get at managing it.

Written by: Claire Calder

16 September 2022

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Inflation Numbers, What Does It All Mean?

Inflation Numbers, What Does It All Mean?

The leaves are gradually turning orange and falling off. The last days of summer may well be behind us as we gear up for what could be a very cold winter. As we head into this winter, the word on everybody’s lips is inflation. We are hearing it everywhere. I previously wrote about it in an earlier blog where we looked at when last did, we experience this level of inflation and what it could mean for you. We are a few months from that article, and it looks like inflation has not stepped off the gas pedal. The Bank of England is reporting the current inflation rate to be over 10%. This is well above the target inflation rate of 2%. So where does that leave us and what is the forecast over the next few months as we head into winter?

Headline Inflation Rate

Firstly, we need to understand the inflation number that we hear almost daily. This number is the Headline Inflation Rate. This refers to the change in the value of all goods in the basket. It is this “basket” that forms a central part of the calculation of the inflation rate as it is the measurement of the change in price for different household items and materials that are integral in the running of households. The current “basket” has around 730 representative consumer goods and services. It is through monitoring the change in prices of this basket that we can get a sense of the true value of investment returns as inflation affects all aspects of the economy.

Headline Inflation Rate​ vs Core Inflation Rate

Now this headline inflation rate is different to the core inflation rate as it is the core inflation rate that excludes food and fuel. It is the food and fuel that tend to fluctuate more than the rest of the basket of goods and services which lends this measure of inflation less volatile than the headline inflation rate.

Typically, in developed economies, food and fuel will account for 10-15% of the household consumption basket as opposed to economies in the developing world where it forms close to 30-40%.

Why Are The Rates High?

So why is the inflation rate at levels that we haven’t seen since the early 90s? It basically boils down to higher energy prices at this stage. Russia’s invasion of Ukraine has led to the gas price to more than double. This has increased the pressure on the value of the basket of household goods as you will be paying more for fuel and energy as a result of the need to import the energy from the producing countries like Russia.

The Bank of England has forecasted the inflation rate to push even higher over the next few months, to around 13%. This means that you will need to plan accordingly for this squeeze over the upcoming months.

Will The Inflation Rate Decrease?

The action to combat this increase in the inflation rate is to raise interest rates. Interest rates are the biggest arrow in the quiver of the Bank of England in combating the inflation rate. They have raised the rate to 1.75% as of August 4th with more increases planned over the coming months. What this means for you is that borrowing will get more expensive but you will be rewarded more for saving. These actions will drive down people’s spending and will help push inflation down.

Outside of the Russians retreating and energy imports stabilizing, it will turn out to be a long winter for many as budgets are squeezed to breaking point.

Written by: Gregory Armstrong

02 September 2022

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Risk Tolerance – What Is Your Style?

Risk Tolerance – What’s Your style?

Risk

Risk – exposing something to loss – can be applied to many everyday actions that people do. There are different risk profiles which define your attitude towards these risks. These include conservative, moderately conservative, moderately aggressive, aggressive and very aggressive. When it comes to money, people’s tolerances to risk differ greatly; some are more than happy to accept a loss for the potential of large gain (very aggressive), some are willing to risk, but would ideally settle for no less than break-even (moderately aggressive), and some hate the thought of losing anything (conservative), so what is your style?

Michael's View

Personally, my tolerance to risk changes depending on the scenario; however, generally speaking I am willing to take a risk, with the hope of a beneficial outcome, so I would argue that my risk profile is aggressive. I think of risk being more of a mind-set and for me the positive outcome more so than the negative outcome. This perhaps explains either my aggressive outlook on risk, or my poor decision making in the past when it comes to things involving risk – that is up to you to decide. Attitudes towards risk can vary depending on people’s personal circumstances; monetarily speaking, it could be assumed that someone with more disposable funds would be more willing to risk their money, as they have a larger amount of it ‘spare’, so they may be more aggressive. It could therefore be assumed that someone with less disposable funds would be more risk averse, and would want to avoid any loss of money and would therefore be conservative.

Does One's Risk Tolerance Change?

One’s attitude to risk can, and quite frequently does, change. For example, bad experiences where someone has risked something, and the result was the undesired one, they may decide to not take risks like that again. As a result, they may go from an aggressive risk taker to a moderately conservative risk taker. Similarly, someone may have positive experiences with more moderate risks, so they may be willing to increase their risk capacity, and look to take more aggressive risks. Examples of risk like this range from investing in start-up companies to sports betting, where it goes right/wrong the first few times, so the individual increases/decreases the risk accordingly.

Risk Insurance

Attitudes to risk also depend on the type of risk in question, as risk doesn’t just apply directly to the loss of money. Despite being unlikely, there is a risk that your property could catch on fire, you could be in a car crash, or a natural disaster could occur. The result of this would be damage to your property which would cost greatly to repair or even replace; people attempt to mitigate this risk by purchasing insurance. Insurance can provide cover to replace or repair an item(s) that is accidentally damaged or damaged for a reason outside of their control. Insurance is a common example of people not wanting to risk the chance of an event not happening, and people being conservative with this specific risk. There are a broad range of insurances out there, including home/contents insurance, life insurance and redundancy insurance, to name a few. Insurance, however, does not guarantee having no risk.

Is Taking A Risk Worth It?

Ultimately, risk is a part of everyday life; applying for a job, doing a certain activity or even extremes such as longer term risks caused by lack of sleep, stress etc. Arguably we can’t mitigate all risks can we? This is why sometimes it is worth it to just take the risk; we unknowingly take risks all the time, so perhaps risk isn’t so bad after all. This being said, it is important to be responsible and don’t fall out of your depth.

Are You Willing To Take A Risk?

If you are looking to make investments, Ascot Wealth Management caters for all different types of investment risk profiles and needs. Products ranging from Portfolio 1, which contains less volatile investments for those who are conservative investors, to Portfolio 5, which holds more volatile investments for those who are willing to invest more aggressively, is an example of what Ascot Wealth Management can provide. Volatility in investments relates to the price fluctuations of said investments; the higher the volatility, the more likely there is to be a change in the price, the lower the volatility, the lower the likelihood of price changes. Higher volatility is commonly associated with higher potential for growth, but on the other hand, it is also therefore more likely to see greater losses. This is the main determining factor for people when they consider investing – do I want aggressive investments that could potentially bring me higher returns, but run the risk of greater loss? Or do I want more cautious investments for more long term, stable growth, with less risk of large losses? That depends on your style.

Written by: Michael Morris

25 August 2022

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Financial Planning Using Cash Flow Modelling

Financial Planning Using Cash Flow Modelling

For the first half of the year, investors have experienced volatile markets. While it may be easy to look at the short term and see negative returns, it is important to bear in mind the recovery and long term growth which we would expect from the markets. This can be difficult to see and assess the impact of, however an insightful tool to allow investors to see the bigger picture is cash flow modelling, especially when investors are looking at their pensions and retirement aims.

My Parents Situation

Recently I have spoken to my parents about their retirement income. While they are aware of the size of their pensions, and the income they would get from any defined benefit policies, they found it difficult to fully understand how much they could afford to spend each year during retirement, how much longer they needed to work for to ensure comfortable retirement funds, and how much they could rely on their savings as income when we are experiencing such high levels of inflation.

How Does Cash Flow Modelling Work?

Cash flow modelling accounts for all aspects of a client’s funds. It includes bank accounts, income, ISAs and pensions, while also accounting for growth of any investments which they hold. This is particularly important in the years when a client is building up to retirement, to stress test their savings and allows clients to regulate and understand whether they will meet their retirement targets. We are able to create clients an in depth model of their finances, not only to show them any excess funds or shortfall they may encounter in retirement, but this cash flow would also allow them to see whether they can afford larger ad hoc purchases, how much market volatility they can withstand, and how soon they would need to start drawing down on pensions and investments.

Managing Risk

Within these cash flow models, we look at capacity for loss calculations. The current markets are still uncertain, and while we would suggest most investors look to the long term market growth, for some investors their capacity for loss will have substantial impacts on their risk tolerance, and cash flow modelling can help to illustrate whether keeping all funds invested has the potential to lead to a shortfall. This would tend to be prevalent when an investor is looking to drawdown on their funds in the shorter term, and therefore it is important to see how much longer their funds can withstand the market volatility before having an impact on their standard of living. Even in stable markets, cash flow analysis can be an insightful tool to understand how much growth an investor would be aiming for in order to sustain their financial targets. 

How Cash Flow Modelling Can Help You

At AWM we offer cash flow analysis as part of our ongoing financial advice to clients. It allows clients to visualise the bigger picture during the accumulation phases of their financial journey with us, and how it ties into their retirement aims and life goals. We are able to create the model specific to you, including any ad hoc purchases you intend to make, and we can change the model to show how your investments may differ with varying retirement ages. 

Written by: Alice Frost

11 August 2022

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Cash Savings

Cash Savings

Information accurate as of 21/07/2022

With the Bank of England base rate at 1.25% and UK inflation hitting 9.4%, it is important to ensure you’re reviewing cash savings to get the best rate possible. To mitigate the risk of losing the buying power of your savings this blog will introduce some of the market leading, Financial Services Compensation Scheme (FSCS) protected accounts available to savers. 

The context of interest rates rising is in response to roaring inflation. The snippet below from the Bank of England illustrates how rates have changed in the last ten years.

Source: Bank of England

We have another rate review from the Monetary Policy Committee (MPC) on the 4th August, with analysts suggesting we could see rates hike to 1.75%. Whilst this isn’t certain, financial markets have set a 94% probability we’ll see the 50bps rise. 

Given we have frequent rate reviews ahead, it may be sensible for savings to consider a range of fixed and variable term savings accounts to hedge rates going even further. Some analysts predict we could hit close to 3% in the next 18 months, dictating a flexible savings vehicle would suit a cautious saver.

NS&I

Premium Bonds from National Savings & Investments have long been a popular choice for savings. The possibility of winning big motivates savers, so it feels like a safe ‘chance’ for large prize winnings. Importantly, money with NS&I is 100% protected from the Treasury, meaning you can ignore the FSCS rules and safely house savings of £85,000+ in value. 

At present the interest rate on premium bonds equates to a 1.40% annual prize fund rate, with all prizes being completely tax free. The maximum winnings are £1million with over 1.4mn winners in June 2022. 

Outside of Premium Bonds NS&I aren’t very market competitive, offering a low 0.5% for their direct saver and 0.35% for their direct ISA. For fixed term, they offer an income bond for two years at 2.2%.

Easy Access Savings

As noted, many savers are opting for instant access to give flexibility for rate rises and access for the impending hikes in their cost of living. Interest rates are usually therefore lower than on fixed savings periods, but the flexibility benefits can outweigh this disadvantage. At present we’d advise on the following easy access savings accounts from the open market:

  1. Chase Bank – an app based bank offering 1.5% AER on savings with a minimum of £1 deployed. They also offer 1% cash bank on debit card spends and a 5% interest on purchase round ups, making them our top choice for flexible, tech savvy savers.
  2. Shawbrook Bank – Shawbrook are offering a higher interest rate at 1.52% but with a minimum of £1,000. Here access is flexible, but you can only withdraw in chunks of £500
  3. Al Rayan – A sharia account, offers 1.6% interest with flexible access for balances over £5,000. They allow instant access with no limits attached.

Fixed Term Savings

Instead of saving in variable rate accounts, savers have the option to fix for between 1 and 5 years plus. For a 1 year fixed we’ve found the best rate to be with My Community Bank, coming in at 2.76% per annum, with a minimum balance of £1,000. Second to this is the Woodland Saver from Gatehouse Bank at 2.75% or Kent Reliance at 2.71%. 

For a two year fixed we have 3.1% at Gatehouse Bank, with five years rising to 3.45% from PCF Bank Limited. Given the difference between these shorter term and longer term accounts, we would advise on shorter term fixing to price in the probability rates will continue to rise for savers until the Bank of England is closer to its inflationary targets.

Cash ISAs

Cash ISAs have long been seen as lower yielding than savings, meaning advisers encourage investors to use their ISA allowance for stocks & shares, and keep emergency cash in savings accounts. We continue to see this theme today, with the top immediate access cash ISA coming in at 1.5% interest from Newcastle Building Society, lower than that of Shawbrook instant access. 

Alternatively fixed rate ISAs for three years will offer 2.75% at Aldermore, or 2.56% from Virgin Money for two years fixed. The two year fixed offerings sit over 0.5% lower than the fixed term non-ISA savings. 

Of course cash ISAs benefit from all interest being tax free, but savers should bear in mind their personal savings allowance. For basic rate tax payers this is £1,000 per annum, higher rate £500 and additional rate £0. This means a basic rate tax payer with a Chase Bank Account would have to have over £66,500 saved to breach the threshold. In the instance a zero risk, higher or additional rate taxpayer who wants this liquid, the NS&I options of Premium Bonds (capped at £50,000) or growth bonds become more plausible.

Concluding Points

Given the central banking intention towards decreasing inflation we expect to continue to see rate rises until we have signs headline inflation is falling. The Governor of the Bank of England isn’t ruling anything out; therefore we’d expect markets to be pricing in a certain level of rate rise from central banks over the coming years. 

Below is a visual from the OIS forwards data sourced by JP Morgan. Here we can see the UK figures at the 3-4% point in the next twelve months, stabilising down to nearly 2% in ten years.

This is coupled with the view inflation will peak in Q3 of 2022, seeing a forecast fall from the fourth quarter of the year.

Given these challenges we would encourage savers to split savings between flexible and fixed rates, with Chase Bank and Gatehouse Bank offering strong product ranges. We’d also suggest maximising the premium bond threshold of £50,000 for zero risk investors or those concerned with FSCS thresholds for savings. 

Please note that these types of products are not suitable for all clients and that this should not be taken as personal advice. All investments can go up and down in value and therefore you could get back less than you invest. Past performance is not a guide to the future.

Written by: Catriona McCarron

21 July 2022

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Investing for the future

Investing for the future

The ice caps are melting, temperatures are soaring and wildlife is struggling, all down to the need to power our modern lives. With 75% of adults in Great Britain worried about the impact of climate change, and a further 43% feeling anxious about the future of the environment more widely (Office for National Statistics, 2021), it’s becoming ever clearer that there is a global need to rectify the injustices we have done to our planet. 

People, governments and companies alike are now scrambling to be at the forefront of these efforts, and what is a more effective way to attain this than starting with changing how we invest?

Ethical Investing

In its purest form, ethical investing is the strategy in which investments are chosen based on one’s ethical code. It strives to support those industries actively trying to make a positive impact, and of course create an investment return. 

The idea of what is ‘ethical’ is will differ from person to person, with some opting for the ‘do no harm’ route, where they will guide their investments by specific cases e.g. avoiding buying shares in Activision Blizzard, Inc. due to the recent sexual harassment scandal, or avoiding so-called sin stocks: tobacco, gambling or weapons organisations to name a few. 

Alternatively, other people will opt for the ‘do good’ route, in which they will support those companies that are tackling ESG issues head-on. E.g. buying Beyond Meat shares due to the positive impact the company has had on the environment as a result of using 93% less land, 46% less energy, and produced 90% fewer greenhouse gas emissions in the production of its’ Beyond Burger compared to its cow counterpart.

The point is that ethical investing is personal to you, and whilst there is no correct way to conduct this strategy, the most effective way will be a combination of both tactics, in order to create a well-diversified portfolio.

How effective is Ethical Investing

As with all investing approaches, there are associated benefits and drawbacks, and the ethical strategy is no different. On a positive note, ESG UK funds have outperformed non-ESG UK funds over 3 and 5 year periods. Furthermore, there is a general idea that companies more concerned with ESG issues are usually ran better and less prone to scandal, which will lead to further material benefits. On the whole, there is the chance for profits, and to feel good doing it!

Of course, ethical investing will experience peaks and troughs just like other strategies. It is important to be mindful of the fact that whilst returns are attractive, there are risks involved. To start, this approach limits your options. Many of the top performing companies have characteristics that fail to meet ethical fund’s criteria, and so are ruled out. Furthermore, just because a company aligns with your own moral compass, there is no guarantee of absolute return.

Is ethical investing for me?

When investing in these types of funds, or employing this particular strategy, it is important to think about your own long term goals, as well as being wary of how much of your capital you are willing to put at risk.

Contact us for advice on your investing needs. We have an array of passionate and knowledgeable advisers ready to take on board any ethical considerations you may have when investing. We can help you too!

Please note that these types of products are not suitable for all clients and that this should not be taken as personal advice. All investments can go up and down in value and therefore you could get back less than you invest. Past performance is not a guide to the future.

Written by: George Kemp

21 July 2022

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Going Green – A look at Property Energy Efficiency

Going Green - A look at Property Energy Efficiency

The Squeeze of the cost of energy prices is felt throughout every home. The soaring rise in energy bills will leave many feeling the pinch. Coupled with the rise in inflation and the current cost of living crisis, there is nowhere to escape. 

Every pound counts and saving where you can is necessary with energy prices predicted to rise further this year. Households are being encouraged to save money by improving energy efficiency. Improving the energy efficiency of your home is the best long term solution to reducing energy bills.  

The mortgage market is doing its part to encourage this and this is how.

Green Mortgages - Go Green and Save!!!

The government set into motion their plans to reduce the carbon emissions by 75-80% of current levels by 2035. Housing is responsible for roughly 14% of the UK’s total emissions.

Regulations to building more energy efficient homes to reduce housing emissions have been put in place by the UK government. Existing homes can play a part too. According to the Climate Change committee, 19 million properties have an Energy Performance Certificate (EPC) less than “C”. 

Mortgage providers have launched “Green Mortgage Products” which incentivise properties with A & B, by introducing lower interest rates than those available for standard EPC rated properties. This is to persuade homeowners to make their homes more energy efficient. 

Energy Performance Certificates are an assessment of how well your property uses and retains energy. The improvements to your homes energy efficiency can save you in energy bills and in mortgage interest payments.

On rates currently available, an EPC rating of A or B would get you a residential green mortgage product rate over five years of 2.56% at 60% loan to value (LTV) versus the standard mortgage product rates which would be 2.67%  for the equivalent LTV. This means someone on a green mortgage interest product will pay 3.09% less interest on their mortgage over that same five year period. This is a saving of thousands over the medium to long term.

As long as your property Energy Performance Certificate is A or B you qualify for a green mortgage.  

Green Mortgages for Buy To Lets (BTL)

Investment BTL properties can also qualify for green mortgage products. The additional benefits of energy efficiency in these properties can extend beyond the lower mortgage interest rates you would qualify for. Energy efficiency properties raise the value of the property and can mean more rent can be charged by the landlord. The tenants would in turn also save on energy bills. 

Many investors have seen to use this as a strategy to increase their property portfolio value by improving low energy efficient BTLs in order to increase the value of the property and be able to charge higher rents and in turn increase their rental yields.

Government help

The government estimates the cost of improving your property to an energy rating of “C” to be around £4,700.  Residential homeowners and landlords on tighter budgets may not have the cash to make the improvements needed to obtain a high enough EPC rating to allow them to switch to a green loan. 

The Department for Business Energy and Industrial Strategy (BEIS) and the Chancellor Rishi Sunak confirmed that the fourth and final phase of the Government’s Energy Company Obligation (ECO) scheme will go ahead. The new ECO grant scheme will run over 4 years, and end in March 2026. Like before, ECO grants will be available to improve the energy efficiency of the UK homes that need it most. The grants are funded by energy suppliers.

In this scheme, ECO grants will focus on a property’s EPC to ensure the home can gain maximum benefit from any energy efficiency measure installed. The aim of the ECO is to help UK homes achieve an EPC rating of at least a C.

Energy Efficiency Improvements to your home

Making your home more energy efficient is not just about installing the most expensive solar panels. The aim is to create all-round home energy efficiency, from roof and windows to walls to heating. Small improvements to the home can count to the overall energy efficiency of your home.

  • Double glazing windows
  • Installing cavity wall 
  • Loft insulation
  • Draught-proofing windows and doors 
  • Installing pipes and tanks 
  • Installing condensing boiler
  • Reducing water usage
  • Energy efficient glazing
  • Installing low-energy usage light bulbs 
  • Energy-efficient heating and air conditioning systems
  • Water heaters (natural gas, propane or oil

The government encourages you to use TrustMark registered company for improvements. Making upgrades to take advantage of requirements to make the properties more energy efficient which will raise the value of your property.

Contact us for advice on your mortgage needs. We deal with a variety of advice services in the mortgage market. We can help you too!

Written by: Nwabisa Janda

16 June 2022

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The Cost OF Living Crisis

The Current Cost Of Living Crisis

UK Inflation has hit a 30 year high of 6.2% in February 2022, the highest since 1992 when inflation reached 7.1%. Although Rishi Sunak’s OBR predicted inflation to average 7.4% this year, analysts speculate inflation could rise to 8.1% during 2022, meaning companies will likely reflect the increased costs of materials on consumers via more price hikes.

Pleasingly, unemployment has fallen to 3.9%, but real regular pay fell by 1% – the biggest fall for eight years. Given this, it is a vital time to think about inflation proofing personal finances and budgeting on a tighter annual income.

Energy Bills

The chancellor announced that there will be 0% VAT for energy efficient improvements which means that you could see a price drop of £1,000 for a solar panel installation. Although this may be a nice discount Mr Sunak did not mention anything about the most prominent illustration of the ‘cost of living crisis’ we’re up against, the rising energy bills.

Energy costs are expected to rise at least 14 times faster than wages in 2022. Trades Union Congress (TUC) expects gas and electricity to go up an average of 54%, with an expectation that the energy price cap will be £1,500 by October 2022. TUC have called on government officials to reduce household costs by introducing windfall tax on energy firms, offering rapid home insulation programmes and giving a boost to universal credit. With such movements likely to be slowly explored, it is important to consider how personal finances can be managed to assist the increased costs of living for all households, but especially lower income households.

Households can save on energy costs by considering some of the following:

  • Have structured products linked to different indexes. For example, the FTSE 100, Euro Stoxx or the S&P 500.
  • Use different counter parties. By doing this, if the counter-party does default, then you don’t lose the money held in all your plans. While it is important for a counter-party to have a good credit rating, this is not regularly updated. Therefore we also look at credit default swap pricing which gives a real time indication of the reliability of the counter-party.
  • Vary the type of plan. This can be done through choosing between deposit, income or kick out plans. It can also be done through choosing between types of kick out plans.

Whilst the market for shopping around between energy providers has diminished greatly, it is always worthwhile using comparison sites to compare your existing deals and ensure you are using smart meters correctly.

Tax Planning

For those who work from home, it is important to remember the working from home tax credits that can be claimed via self-assessment to help cover the costs of home office use. Whilst this £312 tax relief won’t combat the increased costs of using electricity at home, it will take some of the edge off!

However, if you claimed the working from home tax relief in 2020/21 or 2021/22 and have since returned to the office, it is important to check your tax code to ensure this has been removed. This will avoid the risk of receiving a liability at the end of the tax year. As a reminder, a ‘standard’ tax code for a full personal allowance should be 1257L for 2021/22 and 2022/23.

Asides from checking your tax code, you may also have employer benefits worth exploring to reduce your monthly costs. For example:

  • Ensure pension contributions are set up as salary sacrifice. This will save you the 12% national insurance tax or £12 for every £100 you save, unavoidable via net pay or personal contributions.
  • Think about your benefits in kind. If you no longer use the C02 heavy company car on the driveway, can a more environmental and cost effective vehicle be used to reduce your earnings and thus tax due?
  • Maximise company benefits – consider the use of corporate gym packages, cycle to work schemes and life assurance in place of this being a personal cost.

Fixing your Mortgage

Usually the biggest household cost is rent or mortgage repayments. With interest rates on the rise, this is a good time to review variable rate mortgages, especially those with no early repayment charges. At present mortgage rates of 1.5% are still available for borrowers with a sub 50% loan to value. We’d suggest looking into your existing mortgage six months before the end of your term, as we do not expect these low borrowing rates to continue into 2023.

Savings

The Bank of England has recently announced their third rate rise since December 2021, with current rates at 0.75%. This is to try and combat soaring inflation, which the MPC target to be 2%. The recent rate rise of 0.25% will not drastically improve family finances, but it is set to try and dampen demand whilst not draining the UK economy.

High-street banks are reportedly offering interest rates sub the Bank of England base rate, despite illustrating record years for mortgage interest received. Therefore, this is an important time for savers to increase family finances by shopping around for different savings rates.

For those looking to start saving, Cambridge Building Society are offering 5% on its extra reward savers account, with deposits of £250 a month for 12 months. During this period savers will gain an additional £81.58 in interest.

For those with larger sums to save, Aldermore are offering 0.6% on easy access, with Paragon offering 0.8% with £10,000 savings or more. If a notice account suits you, Investec offer a 32 day notice account with 1.1% annual interest.

In recent research from Paragon, over 75% of personal savings earn a rate of 0.1% or less, which given the UK savings reached £1.7 trillion according to the Bank of England, shows there is a significant amount more interest savers could be achieving.

Importantly we’d always encourage savings to ensure they have full FSCS protection with their bank or building society before depositing funds. Current FSCS limits are £85,000 per person per deposit taker.

Please contact us if you need any advice on tax planning, savings rates or mortgage offers given the cost of living crisis identified.

Written by: Catriona McCarron

31 March 2022