Jess Wooler

What Does The Future Hold For The Property Market?

The COVID-19 pandemic has had a huge impact on the housing market and is set to continue influencing demand. So, will property prices continue to rise, or will they fall as pent-up demand dries up?

In spring, as the extent of the pandemic became clear, property viewings were banned, and some agreed deals fell through as the situation changed rapidly. Inevitably, this had an impact on the number of mortgages approved and property sales. Zoopla figures show that from the beginning of lockdown in March to the end of July sales worth £27 billion have been lost.

But since the market has reopened, demand and prices have surged in many parts of the country.

Reopening the market and Stamp Duty holiday leads to a booming property market

As the market reopened, Chancellor Rishi Sunak unveiled a Stamp Duty holiday in a bid to increase property sales. Homes valued up to £500,000 will no longer need to pay any Stamp Duty on the purchase if it’s for their main home. Properties purchased as a second home, holiday home or Buy- to-Let investment will still need to pay a 3% surcharge but the Stamp Duty holiday can significantly reduce the cost.

It’s a step, that combined with pent-up demand, worked in terms of getting the property market moving again.

The latest Halifax House Price Index found that in the third quarter, mortgage applications reached a 12-year high. Average property prices have increased too. In September, the average house price was 1.6% higher than in August and 7.3% higher than a year earlier. It’s the strongest growth seen since June 2016.

While positive for the housing market in the short term, it’s expected that other factors will dampen both demand and prices over the coming months.

Russell Galley, Managing Director at Halifax, said: “It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. The release of pent-up demand and indeed the Stamp Duty holiday can only be temporary fillips and their impact will inevitably start to wane. And as employment support measures are gradually scaled back beyond the end of October the spectre of increased unemployment over the winter will come into sharper relief.

“Therefore, while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt even more keenly.”

Real estate advisors JLL now predicts that UK house prices will fall 8% in 2020 with 650,000 transactions expected, compared to 1.18 million last year. Several factors could lead to activity within the property market falling including:

1. Availability of mortgage finance

This is a factor that’s already having a significant impact on some buyers and, therefore, the market.

As the economic outlook is uncertain, many lenders have restricted their borrowing. In particular, mortgages with a higher loan-to-value (LTV) ratio have been withdrawn temporarily. This has disproportionately affected first-time buyers who now need a minimum 15% deposit for many lenders, compared to the traditional 5-10%.

As first-time buyers struggle to access mortgage finance, demand and movement within the market could stall as a result.

2. The economic outlook

The economic impact of COVID-19 is also a risk factor for the property market. The furlough scheme will come to an end in October and will be replaced by the less generous Job Support Scheme, potentially leading to higher levels of unemployment.

In the three months to August, the unemployment rate already hit a three-year high at 4.5%, and redundancies rose to their highest level since 2009, reports the BBC. As restrictions continue to affect business operations and profitability, Citibank has suggested that the unemployment rate could hit 8.5% in the first half of 2021. If unemployment does reach these levels, it will undoubtedly have a downward impact on the property sector.

3. Brexit

While Brexit may have slipped down the headlines due to the pandemic, it’s still a key issue affecting the housing market.

We’re now just months away from the end of the transition period, with new rules coming into force from January 2021. However, a Brexit trade deal and other changes, such as movement from the UK to the EU bloc, remain unclear. It’s expected that the economic impact of Brexit will have some effect on the housing market but with so much still uncertain, calculating the full extent is challenging.

It’s impossible to predict with certainty what will happen in the property market, especially as the COVID-19 situation continues to develop. But for all clients that are considering purchasing or selling a property, whether as a home or an investment, getting their finances organised is essential. It’s a step that can improve their chances of securing the property they want.

by Jess Wooler

Four Things The Chancellor Announced That Business Owners Should Know About

COVID-19 restrictions continue to affect businesses across the country. But some measures have been brought in that could help your clients keep their businesses afloat if they’re struggling. Understanding the options that are available to business owners is essential during these uncertain times.

In September, Chancellor Rishi Sunak unveiled a new set of measures to replace or complement those initially brought in as the extent of the pandemic became clear as part of the winter economy plan.

So, what are the measures available to help businesses large and small?

1. Paying employees with the Job Support Scheme

Helping businesses retain employees is one of the key motivators behind government support. With the furlough scheme now coming to an end, the Job Support Scheme will begin on 1 November. It aims to protect ‘viable’ jobs and is set to remain in place for six months, with a three-month review taking place.

For business owners, the new scheme helps pay for the salary of staff that are only able to go back to work part-time. For instance, if they work in the hospitality sector and are forced to reduce operating hours, the scheme can help top up the wages of employees.

To be eligible, employees must work at least a third of their usual hours. Businesses will need to pay employees for the hours they work. For the hours that employees can’t work, the government and employer will each cover one-third of the lost pay. The grant will be capped at £697.92.

This means employees that aren’t affected by the cap will receive a minimum of 77% of their normal wages even if they’re only able to work a third of their usual hours. For business owners, it can help retain key members of staff if they aren’t in a position to reopen fully but requires a commitment to pay some of the hours an employee is unable to work.

The Job Support Scheme is open to all business sectors. However, large businesses will need to prove their turnover has fallen during the crisis to be eligible.

As the COVID-19 situation develops, it’s expected that more regions will be categorised as a tier-three risk, leading to new restrictions that will force some businesses, including pubs, restaurants and gyms, to close. If a business owner is affected by these restrictions, a furlough style scheme will be available to help pay employees.

2. Government loan schemes and extended repayments

While the grant schemes offered to businesses are now closed, firms that need additional capital can still access the COVID-19 loan schemes with the option to pay over an extended period. There is a range of loan options available for business owners to consider:

• Business interruption loan scheme: This is a government-backed loan scheme that encourages lending as the government takes on a portion of the risk. This scheme is delivered by a range of lenders, including banks and asset-based lenders. Businesses can borrow up to £5 million in the form of term loans, overdrafts, invoice finance and asset finance. While the government backs these loans, the borrower remains fully liable for the debt, so business owners need to take repayments into consideration when planning.
• Coronavirus Future Fund: The Future Fund provides government loans to UK-based companies ranging between £125,000 and £5 million. However, the firm must at least match the government funding from private investors. The loans are designed to provide a safety net for businesses that rely on equity investments or are unable to access other business support programmes because they are pre-revenue or pre-profit.
• Bounce Back Loan scheme: The Bounce Back Loan scheme is designed to help SMEs access between £2,000 and 25% of their turnover, up to a maximum of £20,000. The government guarantees 100% of the loan to encourage lending. Eleven lenders are participating in the scheme, including retail banks. One of the key benefits is that no repayments are due for the first 12 months and there are no fees to pay. Business owners cannot apply if they’ve already claimed under the Business Interruption Loan scheme, but they may be able to transfer this loan into the Bounce Back Loan scheme to secure more favourable terms.

When these loan schemes were initially announced, businesses had six years to pay. Greater flexibility is now being offered, allowing firms to extend this to ten years if they choose. For businesses that are struggling, there is also the option to make interest-only repayments or suspend repayments for six months without affecting their credit rating.

Business owners can apply for all coronavirus loan schemes until the end of 2020.

3. VAT tax deferrals

Earlier this year, businesses were given the option to defer their VAT bill until March 2021.

However, this still would have left businesses potentially facing a bill that needed to be paid in a large lump sum that would affect their viability. If they choose to, business owners can now spread the cost over 11 smaller monthly payments, beginning in January 2021. These payments will be interest-free and could help business owners to spread the cost while business revenue is down.

4. Additional support for the hospitality sector

The hospitality sector has been one of the hardest hit by the pandemic restrictions.

In the Summer Statement, Rishi Sunak reduced the VAT rate for hospitality businesses from 20% to 5%. This VAT cut has now been extended until March 2021. The Chancellor said this move supports more than 150,000 businesses and 2.4 million jobs.

From a business owner perspective, it’s hoped that the VAT cut will boost customer demand and give businesses in this sector confidence to continue trading. However, the VAT incentive will need to be balanced with restrictions for business owners, such as the 10pm curfew that means restaurants and bars are being forced to close early.

Keeping clients informed of changes

With the situation developing rapidly, it’s to be expected that there will be changes and perhaps additional support measures for businesses over the coming months. As the personal finances and wellbeing of business owners are often intertwined with that of their business, we aim to provide clear information that can help them plan for the short and long term. If you’d like to work collaboratively to provide support for businesses, please get in touch with our team.

by Jess Wooler

Why Power Of Attorney Should Be Considered Alongside Financial Plans

Putting a Power of Attorney in place is often a task that’s overlooked. But it’s one that should be done alongside a wider financial plan.

Having a Power of Attorney in place is essential. Yet millions of Brits haven’t taken the time to organise this important document. It’s something that should be done alongside a financial plan to provide security and peace of mind about the future.

No one wants to think about becoming too ill to make their own decisions but having a Power of Attorney in place is something that can provide security. Despite this, many people haven’t taken the step yet. It’s an issue we’re sure you’ve encountered when working with clients.

Even those that do have a Power of Attorney in place may not have made the decisions with their financial plans and aspirations in mind.

Among the reasons to consider both a Power of Attorney and financial plans side by side are:

1. Understanding their financial position

It can be difficult for clients to make decisions about the future without understanding their current financial position and how it may change in the future.

A financial plan can provide certainty and explore how a client’s finances, and therefore situation, may change in the short, medium and long term. It’s a process that can highlight why a will and Power of Attorney may be needed and how it can help keep aspirations on track. It can also provide reassurances that they’ll be well looked after and secure even if something does happen.

For example, a Power of Attorney may need to make decisions about care, potentially for the long term. For clients who know they have assets that can be used to provide the level and type of care they want, should it be necessary, it can be a weight off their mind.

2. Planning for ‘what-if?’ scenarios

When we set out a financial plan, it’s with long-term aspirations in mind. But we’re mindful that obstacles can get in the way, including those factors that clients have no control over. For this reason, we often include ‘what-if?’ scenarios in our cash flow planning to minimise risks. From a financial perspective, this could include:

• What if an economic downturn affects the short-term performance of investments?
• What if a loved one passed away, reducing income?
• What if I took a lump sum out of my pension in early retirement?

Writing a Power of Attorney supports these steps. After all, no one makes plans believing that in ten or twenty years time they’ll be unable to make their own decisions about these. Putting together a financial plan aims to provide security and peace of mind, even when the unexpected happens, this includes illness or accidents. As a result, we advise clients to ensure they have both a will and Power of Attorney in place, which are then regularly reviewed to ensure they still align with their wishes.

3. Setting out financial wishes to loved ones

Finally, a loved one with a Power of Attorney may need to make decisions relating to property and financial affairs. This can be incredibly challenging at what is already a difficult time.

A clear financial plan will include goals, aspirations and long-term considerations. A plan can help provide a loved one with some direction when they’re deciding what to do. It may help answer questions such as:

• Would they want me to sell their home?
• What did they want to leave behind for children and grandchildren?
• What long-term savings can be used to fund care or living costs?

Of course, a Power of Attorney must act in the best interest of the individual that is unable to make decisions themselves. However, a written financial plan can help align the wishes of a client with the steps a Power of Attorney takes. Creating a financial plan is an opportunity to think about what they’d want to happen and, if appropriate, discuss this with loved ones. In some cases, it can provide confidence that their wishes will be followed even if they’re unable to take the steps themselves.

Helping clients plan for the future

At Beaufort Financial we help our clients plan for the future, giving them confidence in their financial security. This includes writing a will and Power of Attorney to provide peace of mind that should the worst happen, they are still financially secure, or their wishes are followed. We believe these steps should combine financial and legal expertise so that individuals can benefit from peace of mind. If you’d like to find out more about working together, please get in touch.

by Jess Wooler