5 Factors that will Affect Housing in 2018

It’s time to gaze at the crystal ball and make predictions for the housing market in 2018. So what do we think are the
big factors that could affect homeowners, first-time buyers, and property investors this year?

Rates – Interest rates have become a hot topic after the Bank of England’s Monetary Policy Committee raised the
base rate from 0.25% to 0.5%. Although not a big climb, another increase is possible at some stage.
This would affect borrowers on standard variable rates and tracker deals, with those on a £175,000 tracker mortgage
seeing £22 added to their monthly repayments if the base rate increased to 0.75%. But borrowers on fixed rates will
of course see no change.

Housebuilding – Although a slightly maligned sector in recent years, government policies have helped drive a new
wave of housing development, with 217,000 homes coming onto the market in 2016-17.
This is up an impressive 20% on the year before, albeit still short of the government’s target of 300,000 homes a
year. But there are several indicators, such as increased construction activity, which suggests the numbers may
improve again in 2018.

Brexit – There are conflicting reports on how Brexit may affect the housing market this year. But the uncertainty
surrounding Brexit could very well have an effect on consumer behaviour, which means another unpredictable year
in store for homeowners and first-time buyers.

Buy to Let – As well as the next stage in the reduction of tax relief, there are now two more big changes coming the
way of landlords. From April, all landlords of Houses of Multiple Occupation will require a license, previously only
applied to those with property housing 5 or more unrelated occupants.
April again will see the beginning of new rules regarding Energy Performance Certificates, or EPCs. It will be now
unlawful to let or lease a residential or commercial property that has an EPC rating of F or G, which may cause
problems for landlords letting out a house or flat that does not have the required rating.

Housing Policies – The government’s flagship budget announcement that stamp duty has been abolished for first
time buyers on properties valued up to £300,000, will certainly help first-time buyers in 2018.
The Help to Buy Equity Loan, boosted in the budget with an extra £10bn of funding, will continue to support first time buyers. Young savers will also continue taking advantage of the Help to Buy ISA, which boosts savings by 25%
on monthly deposits of up £200.

If you would like further advice and information, speak to on of our advisers today!

5 Points for Drawdown Investors Since the Brexit Vote

Drawdown gives the opportunity for an increasing income that many brexit-684134investors look for in retirement. Stock market volatility after political events not uncommon, but it is something to bear in mind if you opt for drawdown. Investments rise and fall in value; this volatility makes drawdown a higher risk option than an annuity, which provides a secure income for life. Your income could reduce, or even run out, if investments don’t perform as you hoped, you take too much out or you live longer than expected. It needs regular management to make sure you are on track to meet your aims.

1. Think about your goals for the drawdown plan

The flexibility it provides means a wide range of investors with different aims have taken advantage of drawdown. Some investors don’t plan to draw any income, others want to draw a sustainable income throughout their retirement while some are happy to make large withdrawals which deplete the fund quickly.

It’s important to think carefully about what you want from your drawdown plan. This is likely to heavily influence where you invest and how much you withdraw.

2. Review your withdrawal strategy

Withdrawing income makes managing a drawdown plan more complicated than managing a pension before retirement. This is because deciding how much to withdraw and when to make the withdrawal is often not easy. Excessive withdrawals will deplete your fund so getting your strategy right is very important.

Selling investments to fund withdrawals while markets are falling will make it harder for your fund to recover from any losses. If you are worried about whether it is the right time to sell investments you could consider delaying the withdrawal or making a smaller withdrawal.

One approach to mitigate the risks of drawdown is to only withdraw the income your investments produce. This is known as drawing the natural yield. By taking this approach you could help preserve the value of your plan because your portfolio has more chance to grow when the stock markets hopefully recover. You still need to remember the income your investments produce is not guaranteed, it could increase, reduce or even stop for a period.

3. Consider keeping a cash buffer

This could help you continue taking the income you need without having to sell investments when markets are down.

If you don’t have a cash buffer now, it might be worth building one up over a period of time. This could be done by keeping some of the income your investments produce as cash or by selling investments when you feel their value is high. You might also choose to keep a buffer of cash savings outside of your pension (perhaps by saving some of the tax-free cash you received when you entered drawdown).

We suggest any drawdown investor should consider holding at least two years’ worth of planned income as cash. The amount you need to hold will depend on your circumstances, for example whether you have other sources of income to fall back on.

4. Review your investments

Volatility in the markets can create buying opportunities but it can also mean the value of your investments can fall rapidly if the markets turn against you.

The investments within your drawdown plan will fluctuate in value. It’s easy to log in to your drawdown account to view your investments and make a trade.  A portfolio with a diverse range of investments is likely to be better sheltered during market falls and provide more consistent performance.

If you are looking to buy or sell investments you might want to consider doing this in stages to spread the risk.

5. Get help when you need it


What you do with your pension is an important decision. Therefore, we strongly recommend you understand your options and check your chosen option is suitable for your circumstances. You should take appropriate advice or guidance if you are at all unsure.

This article is not personal advice. We offer a range of information to help you plan your own finances and personal advice if requested. Our financial advisers can provide one-off advice as well as ongoing management of your drawdown plan.

Base Rate Drops to 0.25%

bank-englandFor the first time in 7 years the Bank of England has cut the base rate in an attempt to mitigate the impacts of Brexit on inflation and unemployment. The base rate now sits at a record 0.25%, down from 0.5%.

Anyone who currently has a fixed rate mortgage, will not be affected by the changes. However, those on rates which track the BoE base rate will see a reduction in their monthly repayments. The average variable rate borrower will see a reduction of £19.68 per month (based on a current rate of 2.86% on a mortgage of £150,000).

In regards to the lenders own Standard Variable Rates, the indication so far is that the lenders will not be cutting their rates to match the Bank of England.

Bank of England Maintains the Base Rate at 0.50%


Despite market expectations of a decrease in the Base Rate, the Bank of England’s Monetary Policy Committee haveBANK-OF-ENGLAND_2129155b announced they will keep it at 0.5%

Only one Bank of England’s policymakers voted to cut interest rates to 0.25%, while the other eight members of the MPC voted to leave borrowing costs on hold until August.

In the wake of the UK’s vote to leave the EU, Bank of England governor Mark Carney stated monetary easing could take place over the summer and hinted at possible changes to the base rate.

The rate cut would have seen borrowers on base rate tracker mortgages end up better off, while several lenders already increased rates on tracker mortgages ahead of a suspected change.

Brexit Shakes the Market

Last weeks vote heralds a dramatic & profound change to the UK’s position in the world. However it is important to take stock of events.
The chart below shows the trajectory of the FTSE 100 Index since 2007 – and puts recent events into perspective when compared with events during the Great Financial Crash of 2008.


The result was clearly a surprise with Sterling suffering a 7% fall in value against US Dollar to trade at its lowest level for 30 years. £200 billion was wiped off the value of the UK stock market in just 10 minutes of opening, as well as major falls in other global equity markets. We have now seen the market bounce back from its earlier intra-day lows, however volatility in the Sterling and equity market was to be expected, especially as these markets had been positioning itself for a Remain victory in the days leading up to the result.

More bounces in asset prices and currencies are to be expected over coming days, as the re-rating process of the markets takes its course. However, we have heard reassurances from the Governor of the Bank of England that this will not be a re-run of the Great Financial Crisis of 2008, as UK banks are much more highly capitalised and rigorously stress tested than then. Nor is there any expectation of a global trade collapse as then. The Bank of England has also announced an additional £250 billion of funding and to do what it takes to support the financial system, as the UK economy starts to transition its relationship with the EU.