Why making a will matters
Making a will might not be at the front of your mind. Nevertheless, if making sure your finances are properly managed, then ensuring you have one in place is a crucial aspect of good financial health.
Wills can be a tricky subject matter. They force us to confront one of the most difficult issues in life – what to do with your worldly possessions when you’re gone. However, it is an essential matter to take care of, especially to give your loved ones peace of mind should the worst happen. It will also ultimately provide your family with clarity over inheritance and your wishes. A will can prevent messy issues and even disputes over what happens to your estate.
If you die intestate, there are rules that govern how an estate can be allocated, which can lead to suboptimal outcomes depending on what you want to happen. This particularly matters for couples that are unmarried, as the partner could conceivably be left in the cold without a will to provide for them. There are also potential tax implications if an estate is not managed properly after death.
If you don’t draft a will, your spouse or civil partner (if you have one) will inherit your personal possessions and the first £250,000 of your estate, plus half of whatever is left after that. If you have children, they will then be entitled to the rest. If you don’t have a spouse but do have children, the estate will be divided equally among them. If you don’t have children, whoever are your nearest relations will inherit instead.
How to make a will
A will is a legal document, so ultimately writing what you want down on a piece of paper and signing it won’t be enough. However, making a list of your wishes is a good place to start. It isn’t an obligation to use a solicitor to draw up a will. To do so can be as simple as writing your wishes up and having two people witness you sign it. This must be done voluntarily and without pressure from a third party.
You can also use professional will writing services, charities such as Will Aid or your bank (although not all offer such a service). The costs of this will vary depending on the service offered. Beneficiaries, including partners or children, should not act as witnesses as this can lead to disputes down the line. You will also need to nominate executors to carry out your wishes. This can be a spouse, child or children or another trusted friend or relation.
It is a good idea to keep your will up to date as well. This should be done every five years, or any time there is a significant change in your financial or lifestyle circumstances. Alterations should not be made to the original document. You can add supplements, called a ‘codicil’ for minor changes which should be signed and witnessed in the same manner as the original will. Big changes however, such as divorce or remarriage, generally require a new will to be drafted in toto.
Once your will is drafted it is important to keep it somewhere safe, and ensure that the executors of the will know where it is located and how to access it (if it is in a place such as a secure lock box or safe).
How a financial adviser can help
A DIY will might seem simple, but depending on the complexities of your wealth and possessions, it is advisable to consult with a professional, be they a solicitor or a financial adviser. A financial adviser can help you to make a list of the wealth that sits within your estate, what should or should not be included in the will and how it should be apportioned. This is particularly relevant when considering the implications of inheritance tax. An adviser can help to assess the best way to share your estate that reduces IHT liabilities. They can also advise you on important exemptions such as gifting throughout your lifetime or giving money away to charity, plus the rules around ‘potentially exempt transfers.’
A financial adviser can also help you to structure your wealth in a way that minimises IHT liabilities and will be able to advise you on limits relating to property wealth and other allowances. Tax wrappers such as pensions can help to mitigate some of the liability, but come with rules that need to be carefully followed.
The complexities of getting a will right make it a potentially crucial document in your financial planning. For this reason, it is essential to consult a financial adviser to ensure your will is drawn up with the most careful consideration possible.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
Government to accelerate State Pension age uplift - could you be affected?
The Government is looking to bring forward the date at which the State Pension age increases, according to a report from Money Week.
Under current plans the State Pension age is set to rise from 66 to 67 by 2028. The next increase is currently set for 2046, when the limit will rise to 68. However, under plans being considered by the Government, the next increase could be brought forward by over a decade to as early as 2035. This means anyone aged under 55 now could face waiting longer to receive their State Pension, depending on what year the Government brings forward the age uplift to. Those born after April 1971 will already have to wait till age 68 under current rules.
Why is the State Pension age under review again?
The State Pension is one of the largest single costs the Government faces in its annual budgets. This is why in recent years it has pushed up the State Pension age to save on costs, particularly as life expectancy has soared for men and women in the years since it was introduced. Birth rates have also fallen, leaving less people to pay the taxes to fund an ageing population.
Conversely, critics of the Government’s new plans have highlighted that life expectancy levels have in fact reversed in the past few years, meaning the projected future costs are lower than anticipated. The Government has a life expectancy calculator you can check here.
With recent economic events the Government is finding it hard to plug shortfalls in its budget, with a combination of low growth and high debt costs squeezing its spending power. While politically difficult, increasing the State Pension age is one way for it to save money. The Government is now set to publish its State Pension age review in May.
What should I do?
While many people see the State Pension as a right they accrue through a lifetime of work and paying taxes, there is no ‘pot’ of money being saved into. The Government pays for the State Pension with taxes it rakes in each year from those in work. This is why it doesn’t have the funds to meet commitments it previously made, and why it is backtracking on those historic pledges.
The message here is that you should not rely on receiving a good State Pension income in retirement. While it can help, there are things you can do now to plan to build your wealth so as not to be dependent on the benefit in old age. This includes saving into pensions, ISAs and other tools for building long-term wealth.
If you would like to discuss your options, don’t hesitate to get in touch.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
The World In A Week - Are we there yet?
Written by Chris Ayton.
After a robust start to the year, global equity markets paused for breath last week with the MSCI All Country World Index down -0.2% in local currency terms. Sterling’s continued strength reduced that to -1.5% for GBP based investors. In fixed income, the Barclays Global Aggregate Index was up +0.2% for the week in GBP Hedged terms.
The FTSE All Share Index dropped -0.9% over the week but remains up over 4% in January so far. UK retail sales volumes were down for a second consecutive month as the increased cost of living continued to take hold on consumers. Forecasts had been for a small rise. However, UK inflation remained sticky at 10.5% in December 2022 which, although down from the 11.1% October high, remains elevated and way above target. It was also notable that UK food inflation increased by 16.9% over the month, the largest rise since records began in 1977. This data is unlikely to ease the pressure on the Bank of England to raise interest rates when it meets again on 2nd February.
In the US, the S&P 500 Index was down -1.9% for the week in Sterling terms. The market reacted negatively to US retail sales and industrial production both declining in December by more than expected, prompting fears of a US recession to rise. At the same time, prominent US companies such as Microsoft and Google’s parent, Alphabet, joined other tech firms by announcing they will be laying off tens of thousands of workers. Whether this will push the Federal Reserve to slow rate rises remains to be seen.
In Europe, the European Central Bank (ECB) president, Christine Lagarde, warned that rate rises in Europe still had much further to go in order to tackle inflation. She encouraged financial markets to “revise their position” that the ECB would soon slow down. MSCI Europe ex-UK finished the week down -1.4% although this index is still up +5.5% for January so far. Bank of America data suggests this is partially down to investors cutting allocations to the US stock market to their lowest level for 17 years, instead of favouring perceived cheaper opportunities in Europe. Assets have also been flowing into Emerging Market equities, which are also collectively up over 5% this year.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 23rd January 2023.
© 2023 YOU Asset Management. All rights reserved.
The World In A Week - A sparkle of hope
Written by Ilaria Massei.
Last Friday, we saw a positive UK GDP reading with the UK economy growing by 0.1% as services activity strengthened. Moreover, the Office for National Statistics data published last Friday showed that a recent fall in gas prices helped household finances and boosted savings. This data is certainly encouraging as it could suggest that the UK has avoided a recession (defined as two consecutive quarters of negative GDP growth). However, this might also suggest that the Bank of England will be forced to raise interest rates again, given that the positive GDP could lead to inflationary pressure. On a separate note, Rishi Sunak and his government rejected the request coming from businesses to reopen immigration. This is to especially help the hospitality sector, which is suffering from labour shortages, and is arguably holding back the UK economy from growing. The Prime Minister will re-address this and his plan will be one of the main points of the Budget in March.
In Japan, the Yen and the long-term Japanese government bond yields surged, raising uncertainties over the Bank of Japan’s policy board meeting this week. The Bank of Japan reviewed its long end yield curve policy measures by widening its 10y JGB yield target to +/- 0.5% (previously +/- 0.25%) in December. This measure was supposed to restore order in the Japanese bond market, distorted by the central bank’s ultra-loosing policy. However, the measure increased volatility, suggesting that the Bank of Japan might need to provide forward guidance to the market.
Elsewhere, Emerging Market stocks have seen a great rebound with the MSCI Emerging Market Index up +2.9% last week in local currency terms. This is the result of two forces both influencing the balance of trade in Emerging Markets, in a positive way. On one hand, we have seen signals of easing inflationary pressures globally that might suggest that the Federal Reserve will slow its interest rate rises. Conversely, China since lifting its Zero-COVID policy restrictions, is suggesting a recovery in the economy this year. An increase in activity in China will likely lead to a rally in Emerging Markets as Emerging Market countries are beneficiaries of higher demand for commodities and other services that serve the Chinese population.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 16th January 2023.
© 2023 YOU Asset Management. All rights reserved.
The World In A Week - The smell of stagflation
Written by Millan Chauhan.
We saw some promising news on the inflation front as the Eurozone’s consumer prices rose by 9.2% year-on-year in December 2022 which was down from 10.1% in November. The reading was well below preliminary estimates of 9.7% and was the lowest point for four months. This was attributed mainly to a short-term decline in energy prices which still remain elevated. However, the core inflation print (which excludes energy, food, alcohol, and tobacco prices) increased slightly to 5.2% in December from 5.0% in November on a year-on-year basis which remains above the European Central Bank’s target of 2%. This could be a sign that inflation has started to peak in the region, European markets reacted well to signs of inflation slowing with the MSCI Europe ex-UK Index closing +4.1% last week.
In the US, the Institute for Supply Management (ISM) Services PMI print came in at 49.6 for December which was lower than initial forecasts of 55.0 and which compared to 56.5 for November. This was the first contraction in the services sector data since the height of the COVID-19 pandemic in May 2020. The report combines monthly question responses from over 370 purchasing and supply executives in the US. A reading below 50 generally indicates that the economy is contracting.
Finally, we saw further evidence of weakness in the UK Housing market as house prices fell -1.5% on a month-on-month basis in December which brought the annual house price increase to 2.0% on a year-on-year basis. Households are currently grappling with significantly higher mortgage rates following a series of interest rate hikes by the Bank of England. Households are having to contend with a higher variable rate or lock in a higher fixed rate as they re-finance their mortgage, both scenarios result in higher monthly payments, which many have not been accustomed to.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th January 2023.
© 2023 YOU Asset Management. All rights reserved.
The World In A Week - The Santa Claus rally gets stuck up the chimney
Written by Cormac Nevin.
The last month of 2022 witnessed weak returns across asset classes, book-ending what has been one of the most challenging years for investors in decades. The MSCI All Country World Index was down -4.9% for the month of December in GBP terms, while the Bloomberg Global Aggregate Index of high quality global bonds was also down -1.3% in GBP Hedged terms.
There were a number of contributing factors to the weak market performance in the final weeks of 2022. US jobs data on the 15th and 22nd of December came in stronger than anticipated, which were followed by stronger consumer confidence data released on the 21st. The market likely interpreted this as a green light for the Federal Reserve to continue the policy of monetary tightening to combat inflation which has terrified markets all year.
The month also saw a continued underperformance of growth equities vs their value counterparts, with the MSCI All Country World Growth Index down -6.5% vs -3.3% for the value-biased equivalent index (both in GBP terms). Many of the growth names which fared so well in 2020 and 2021 continued to come back down to earth.
As we begin a new year, things are looking arguably rosier for investors. Inflation is continuing to fall in the US at a faster rate than anticipated. It is also likely close to peaking in the UK and Europe (baring any further escalation in geopolitical tensions etc). Asset prices across the board are at some of the most attractive levels they have been at in years, with even high quality government bonds offering decent yields. While the last year has been painful, it presents opportunities and the ability for long-term investors to lock in future gains.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 3rd January 2023.
© 2023 YOU Asset Management. All rights reserved.
Year ahead for personal finance: what will happen to your wealth in 2023?
The past 12 months have been a particularly turbulent time for our finances. Soaring inflation and consequent rising interest rates have been the theme of 2022. But is this set to continue?
Inflation has affected nearly every aspect of our lives. From how much we pay for groceries, to heating our homes and our investment portfolios – nothing is left untouched in financial terms.
But what can we expect in the next 12 months? No two years are ever alike so the challenges ahead will be different from those we have had to face in 2022.
Here are some of the major themes to be aware of.
Prices
Inflation was the watchword of 2022, and this doesn’t look like it is going to get much better very quickly.
In global terms the outlook is beginning to vary, with signs that price rises are beginning to slow in regions such as the US. But in Europe it is unlikely to get much better quickly.
This is because the inflation crisis in Europe and the UK is much more closely associated with energy prices, than in the US where inflation is predominantly a hangover from the COVID-19 pandemic.
Because of the war in Ukraine, energy prices are going to stay higher for longer thanks to limitations on the supply from Russia, on which many European countries had become all too reliant upon in the past few years.
High energy prices are pernicious for the economy because they impact just about everything else in our lives – from powering and heating our homes to the input costs of making and transporting the food we eat, or just about anything else – it all requires energy. If that energy costs more, so will everything that relies on it.
In terms of practical forecasts, the Bank of England sees the consumer price index (CPI) inflation beginning to fall slowly from early next year – but that it will take around two more years to reach its target level of 2%.
So, expect pressure to begin easing, but to persist for some time to come.
Interest rates
This forecast will have direct implications for the level at which the Bank of England sets the base rate. The Bank has hiked the rate hard in the past few months to try and get inflation under control.
However, now it sees inflation beginning to slow its progress, it’s likely that its rate hiking path will also start to ease, as it waits to see the effect on the economy. The Bank has warned that it thinks investment markets are pricing in too many hikes, but those expectations have yet to come down.
The current expectation is that the Bank of England will reach its ‘terminal rate,’ i.e. the high point of interest rates in the cycle of rises, at around 4.25% – it is currently 3%. So, expect more rises to come, with more expensive credit, mortgages, and better savings rates.
Economy
Interest rates and inflation have a major impact on the health of the economy. The Bank of England has already predicted that the UK economy is in a recession, but at the time of writing this is unconfirmed.
An official definition of recession is two consecutive quarters of negative economic growth. The UK did contract by 0.2% between July and September, according to the Office for National Statistics.
If the economy does continue to contract, inflation could come down more quickly than expected as people stop spending to protect their core assets. Unemployment could also begin to rise, something we’ve yet to see much sign of despite tough economic conditions already prevailing.
The Bank of England ultimately predicts that we’ll go through one of the longest economic recessions on record. But the good news is that it expects this recession to be relatively shallow compared to others, with GDP ultimately not falling more than 2.5% in its projections. By contrast the Great Financial Crisis saw the UK economy fall by around 6%.
Taxation
The health of the economy has a direct impact on how the Government plans and organises its economic plans and taxation measures.
As we’ve written elsewhere this month, the Government has hiked taxes and cut allowances already to help it balance its budget.
But if economic conditions worsen then the Government might feel compelled to tighten tax rules further in March to bring in more money.
There has been much debate about whether or not raising taxes as the economy contracts is a good idea, but the reality is that the Government has to pay its bills or else cut services. With its debts getting more expensive thanks to rising rates, it faces little else in the way of choices.
Housing
The property market is one of the most high-profile casualties of rising rates, and has been further impacted by the financial and bond market implications for mortgages caused by the disastrous mini budget in September.
According to Halifax Bank, house prices fell 2.3% in November, the biggest monthly drop since the financial crisis in 2008.
Unfortunately for homeowners looking to sell in the next year, this situation is unlikely to improve significantly. That being said, mortgage rates have improved somewhat since the worst effects of the mini budget eased, making it slightly easier for prospective homebuyers.
But the overall economic issues, inflation and interest rate rises combined could depress prices for the foreseeable future, after many years of explosive growth.
Investing
It has certainly been a tough year for investments, from equities to bonds – nothing has gone unaffected by rising rates.
While it is impossible to predict where investment markets will go, what is consistently true is that there will always be good opportunities available, especially for those that use carefully planned wealth management to achieve their long-term goals.
It’s important to remember that building wealth through investing is a long-term pursuit, so the short-term impacts of market movements have to be managed with a bigger-picture perspective in mind.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
Autumn Statement 2022: everything you need to know for your money
After a controversial mini budget in September, new Chancellor Jeremy Hunt announced a series of measures in his Autumn Statement on 17 November.
The update contained a raft of measures that will affect households – some quickly and directly and others obliquely, affecting your wallet over time.
Here is a breakdown of everything you need to know that is changing.
Income tax – the thresholds at which we pay income tax have been frozen for longer. This means the personal allowance will stay at £12,571 and the higher rate of 40% which kicks in at £50,271 will remain until 2028 at least. The 45% additional rate has been lowered from £150,000 to £125,140. This will take effect in the new tax year on 6 April 2023.
Dividend allowance – the dividend allowance will be slashed by 50% – from £2,000 to £1,000 from the new 2023/24 tax year. It will then be cut even further to just £500 in April 2024.
Capital gains annual exemption – the capital gains tax (CGT) annual exemption is being more than halved from £12,300 to £6,000 from the new tax year. This will be halved again in April 2024 to just £3,000.
National Insurance – the current thresholds, like income tax, will stay at the same level until 2028.
Inheritance tax – the thresholds for inheritance tax (IHT) will stay the same until April 2028. The nil-rate band for IHT is £325,000 with an additional residence nil-rate of £175,000. The taper for the residence nil-rate band kicks in at £2 million.
Stamp Duty – Stamp Duty Land Tax (SDLT), which was cut in the mini budget in September, will retain the new nil-rate threshold of £250,000 for normal buyers and £425,000 for first-time buyers. But this will only remain in place until March 2025 at which point the thresholds will revert to their previous levels of £125,000 and £300,000 respectively.
How will the changes affect your wealth?
As mentioned above the changes to financial rules by the Government will have some quick effects on your money, while others will take more time to be felt.
For instance – the dividend allowance and CGT exemption cuts will be felt quickly, and measures will need to be considered to mitigate the impact. With little time left to benefit from the higher allowances, anyone with tax-free allowances in pensions or ISAs should consider using those up if possible.
The changes to income tax – or lack of changes – have a more oblique impact on your earnings. While there are no changes to the thresholds, this will mean that whenever you receive a pay or income increase you won’t feel as much benefit as you might have previously.
This is especially pernicious in a high-inflation environment as pay rises tend to be pushed higher to meet living costs. This just serves to send more money towards the Treasury, especially as people are tipped into higher tax bands.
Other moves – such as the sunsetting of the Stamp Duty Land Tax (SDLT) nil-rate band levels – have been criticised by experts who warn that setting an end-date for such measures in the future sets a target time for sellers and buyers which could cause chaos in the market.
What’s clear from these measures is that managing money and wealth isn’t getting easier, making financial advice more relevant than ever. Don’t hesitate to get in touch if you want to discuss your options.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
Car finance rates rising: what’s the best way to pay for your next car?
Prospective car owners are finding that buying their next vehicle isn’t as straightforward as it once was, thanks to rising interest rates.
The economy has benefitted from over a decade of low rates, making car financing affordable for many. But those rates are now rising considerably, with the indication that the Bank of England isn’t going to stop hiking yet. With that in mind, buying a car with finance isn’t as good value as it used to be. But there are still some good options for prospective owners.
Here are some key ideas to consider when deciding on your next car.
PCPs
Personal contract purchases or PCPs have become a ubiquitous way to buy a new car in the past few years.
Typically, these kinds of deals mean that you pay lower monthly instalments than hire purchase or via personal loan, making it more affordable for families.
But the upshot of this is you never really own the car. At the end of the deal (typically around three years) you either:
- Pay the ‘balloon’ payment – a lump sum – and take full ownership of the car
- Return the car to the dealership and get a new PCP deal with a new car
- Return the car and walk away.
The trouble with option three is that, typically, the dealer will become a lot more officious about any scratches, dents, or mileage overuse and is likely to charge you fees. It’s in their interest to see you roll into a new finance deal.
As interest rates rise, credit on PCP deals is getting more expensive. This means opting for longer four-year contracts or facing higher monthly repayments. According to data from motoring group What Car, PCP costs have risen around 40% since 2019, reflecting a tight car market and rising interest rates.
Recent stats from automotive IT firm NTT Data UK&I suggest that the majority of people who have PCP contracts currently are now likely to try and refinance their current cars when their deal comes up rather than opt for a new PCP loan with a new car.
Hire purchase
Hire purchase is the more traditional route for anyone looking to buy a car and comes with less caveats. Once you’ve paid off the HP loan, the car is yours and there is nothing further to worry about.
But this means that monthly payments will generally be higher than for PCP. HP loans are also impacted by the rising bank rate, which means these deals are getting more expensive too.
Leasing
Leasing a car is different from PCP or HP because you never actually have the opportunity to own the vehicle. In effect, you are paying a monthly rental fee for a fixed period, after which you give back the car and walk away.
The benefit of leasing deals is that there is no credit calculation made on the car, so these kinds of deals aren’t directly affected by rising interest rates, according to Leasing.com.
That being said, the car market has experienced very unusual circumstances in the past 18 months thanks to supply chain shortages. This means new and used car prices have gone up, which in turn has made leasing more expensive.
Unsecured personal loan
An unsecured personal loan can be a good option when looking to buy a car, especially for those of us who don’t trust dealers to offer the best deal. Getting an unsecured personal loan will require you to shop around for the best deal available and make an application.
Once you’ve been successful and the loan has been given to you, you’re free to use that cash to buy a car. But like the other forms of credit, this market has also seen interest rates go up in the past few months.
There’s another caveat here that your credit rating needs to be in good shape in order to secure a good deal. MoneySavingExpert has a great loan calculator that can help you see which deals you might be eligible for.
It’s also important to remember with these kinds of deals that the APR you see for the loan after a soft check might not be the one you actually get after making an official application. This is because loan companies only need to offer that rate to 51% of their customers in order to be able to advertise it.
If you do go down this route and find the APR you’re offered wasn’t what you expected, you’re under no obligation to accept it – just make sure you tell the provider you’re not interested in moving forward with the application. However, the hard search made on your credit report will appear, so making more applications could harm your credit score.
Buy outright/buy cheaper
Buying outright is perhaps the best way to go if you have the cash funds available, as it eliminates a lot of the variables mentioned above.
That being said, buying a new car is one of the worst ways to use your money in investment terms. According to The AA, new cars lose around 60% of their value (assuming an average mileage of around 10,000 miles a year) in the first three years out of the showroom, meaning the cash you’ve put into that vehicle is essentially gone forever.
There are however variables to this including condition, make and model, fuel type and other factors that will affect the price over time, with some holding up better than others.
With that in mind, lowering your expectations and going for a used car could be the soundest financial decision of all. Older cars that have some mileage on them tend to depreciate in value much more slowly, and in many cases these days you’ll find 4–5-year-old vehicles will have many of the bells and whistles you might expect in a brand new one.
It is also important to remember with cars that the cost isn’t just in the price of the vehicle. Running costs of fuel, insurance, maintenance and repairs all factor in to the ownership of a vehicle, so finding the right one that doesn’t keep you reaching for your wallet is key.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
The World In A Week - Central banks tighten… but markets get looser
Written by Cormac Nevin.
Last week markets continued on their positive trajectory for the year , spurred on by a flurry of central bank interest rate decisions and press conferences from the Bank of England, US Federal Reserve and the European Central Bank (ECB). Growth equities led the way last week, with the MSCI All Country World Growth Index up +4.2% in GBP terms. The more value-orientated FTSE All Share Index of UK stocks was up +1.9%, while Emerging Markets (as measured by the MSCI EM Index) were one of the weakest performers but still up +0.9%. Fixed Income markets also had a strong week, with the Bloomberg Global High Yield Corporate Index up +1.0% and even the safest government bonds (measured by the Bloomberg Global Treasury Index) rallying +0.4% (both in GBP Hedged terms).
As mentioned, this price action in markets was largely viewed as the result of the market’s continued game of chicken with global central banks. All central banks raised their policy interest rates in their ongoing fight against inflation, however market participants appeared to be of the view that each policymaker was approaching the end of their rate hiking cycle and responded with a touch of exuberance to the prospect of the end of rate increases (or indeed the commencement of rate cuts). The Bank of England increased rates from 3.5% to 4.0%, the US Federal Reserve moved from 4.5% to 4.75% and the ECB moved from 2.5% to 3.0%.
If you are struck by the paradox of central banks tightening policy (via raising interest rates) but markets responding with looser monetary conditions (via increased equity prices, tighter credit spreads etc.), then you are not alone! We think it is an illustrative reminder of the forward-looking nature of markets as they look through the proximate actions of policymakers and to where “terminal rates” might settle.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 6th February 2023.
© 2023 YOU Asset Management. All rights reserved.