danielashby

The effects of inflation - and how to combat the latest rise

November 2017 saw inflation hit 3.1%; the highest it has been since 2012, as reported through the Consumer Price Index (CPI).

As 2018 gets underway, thousands of households will be feeling the squeeze and looking for ways to combat the shrinking value of their income or capital.

What is inflation?

According to the Office of National Statistics (ONS), inflation is The rate at which the cost of goods and services rises year on year.

Over time, goods and services increase in price, if income and capital fails to grow at the same rate, household budgets can feel tighter as a result.

Inflation cannot be avoided, it is a necessary factor in any successful economy. The resulting increase in demand for products and services drives production and manufacturing, which ensures that there are enough jobs and that people can afford to live.

As individuals, we can't impact the rate of inflation. However, it is necessary to monitor the rate at which it is increasing, as this is what will affect our living standards.

The Consumer Price Index (CPI) measures and reports the rate of inflation. It does so through fluctuations in the price of everyday products. It does not show the effects on individual markets, but it does offer a great overview of the cost of living for an average person or household.

Consider everything you buy throughout the year; from food staples, to clothing, holidays and hobbies. The CPI works by comparing the total cost of the products and services year-on-year.

The effects of inflation

As inflation rises:

• The cost of living increases
• Interest rates could potentially rise
• Capital is de-valued; and so is your income
• It becomes more difficult to make big purchases
• The value of your savings is eroded

When inflation rates are high, almost everyone is affected in some way. However, different groups see different outcomes, for example:

• Savers: If the interest rate is lower than the rate of inflation, the real value of savings will decrease. Therefore, savers, who are more risk averse by definition, could very well experience the one thing they are trying to avoid; a loss of capital value.
• Annuity holders: An Annuity provides a guaranteed income for the rest of your life, and potentially, your spouse or partner's. When bought, the consumer is able to choose between a level or Index-linked product. Level Annuities are the most commonly purchased. As the cost of living rises, a pensioner receiving a flat pension income may find it harder to meet their financial needs over time.
• Employees: If your pay rises are not in line with inflation, the buying power of your income is diminished. This, combined with the rise in interest rates, designed to offset the effects of inflation, can put a squeeze on household budgets.

Offsetting the effects

Combatting the effects of inflation is an ongoing battle. However, with careful planning and by staying informed, you can remain financially stable. Nine things you can do to help yourself are:

1. Shopping around for the best savings account: putting in the effort now could save you a lot in the long term, as well as helping you to maintain the value of your capital.
2. Hold savings tax efficiently: utilising products which allow you to collect the returns tax free, will mean that you see more of your returns than if you had to pass some of the interest on to the taxman. Cash ISAs are the best example of these. Use your Personal Savings Allowance (Up to £1,000 of interest tax free for basic-rate taxpayers and £500 for higher rate).
3. Consider investing rather than saving: Over a longer term, investing has the potential to produce higher returns than saving. Of course, this comes with a risk to your capital and the value can fluctuate over time. However, currently saving accounts are almost guaranteed a real-term loss of value for your money. So, now might be the time to consider becoming an investor.
4. Retiring: Fewer people are buying an Annuity when they retire, due to Pension Freedoms. However, if you do decide to purchase an Annuity, think long and hard about the effects of inflation.
5. Budgeting: While inflation may not be having an immediate effect on your budget, if the gap between price rises continues for a long period, you will notice it. Therefore, preparing now will pay off in the long term. The price of living may be going up, but the best way to stay financially secure is to plan your finances in advance.
6. Increase your income: Put yourself in as good a position as possible for pay rises, bonuses and other financial incentives which may be available from work.
7. Build a safety net: Most experts advise having an emergency fund which could cover three months to one year's living expenses. Having this in place gives you an added layer of financial security which will be extremely useful in the event of an emergency, illness or unexpected rise in the cost of living.
8. Mortgage: Mortgage rates should be monitored constantly to ensure that you have the most competitive rate available. Interest rate rises are common when inflation is high, and that means a rise in monthly payments for tracker and variable rate products. Make sure that you can afford repayments if interest rates rise and your budget is squeezed further.
9. Seeking advice: An Independent Financial Adviser will help you to make the most of your income. By getting to know you and your circumstances, they can point you toward the best products, methods, and budgets for you and your family.

For more information about inflation, or to discuss ways to protect your finances, contact us.

by danielashby

Beaufort Analysis 262 - Cost of living squeeze

High street spending in the run-up to Christmas increased at its slowest rate for five years due to escalating prices forcing shoppers to spend more on food and other essential items. The news from the British Retail Consortium (BRC) sent a worrying signal to non-food retailers at a time of crucial trading updates for the sector and this has been borne out by those companies reporting thus far. For the three months to December, food sales were up 2.6% while non-food items fell 4.4%, prompting the BRC chief executive to declare that the divergence had never been so stark.

Due to continued high inflation and low wage growth, there has been a rise in consumer debt, but according to the Bank of England (BoE) and Financial Conduct Authority (FCA), this is due to the most credit-worthy borrowers taking advantage of cheap car finance deals and interest-free credit card offers. Consumer borrowing has increased at its fastest rate for more than 11 years and BoE Governor, Mark Carney, has warned that continued unsecured lending at the current rate could destabilise the financial system.

Strong economic growth has pushed the price of Brent crude oil to a three-year high of almost $70 a barrel, assisted by falling inventories. Additionally, the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC members have ratified their agreement to curb production until the end of 2018, and there are fears that Donald Trump will hit Iran with fresh sanctions, constraining oil supply. With consumer spending already declining, drivers could be forced to pay more at the pump this year.

More positively, UK manufacturing output expanded at 0.4% in November; its seventh monthly increase in a row and its fastest rate since 2008, according to the Office for National Statistics (ONS). The growth in manufacturing helped Britain's trade deficit narrow by £2.1bn as exports outweighed imports. The construction industry, however, contracted at its fastest rate for five years, falling 2% year-on-year, amid fears over Brexit though it had risen around 30% from mid-2013 to its peak in March 2017.

The markets nevertheless, continue to provide investors with some financial comfort as all four major UK and US indices, as well as most European and Asian bourses, hit fresh highs. According to the European Commission, the strength of the industrial sector has lifted UK economic confidence to a six-month high with Eurozone industrial confidence at its highest since 1985, but for how long will this continue?

by danielashby

Budget 2017: first rise in Pensions Lifetime Allowance for seven years

For many people, Philip Hammond's announcement that the Lifetime Allowance will be rising is welcome news.

As part of the Autumn 2017 Budget, the amount you can hold in a pension fund, without incurring taxes, will rise by £30,000; from £1,000,000 to £1,030,000, effective from April 2018. This is a welcome increase, considering that the Lifetime Allowance started at £1.5 million in 2006/7, rose to £1.75 million in 2010/11 and fell to £1 million, where it remained until the budget announcement.

But what does that mean for you?

Understanding the Lifetime Allowance

The Lifetime Allowance is the maximum amount you can hold in your pension, before tax will apply. This includes all forms of pension, including the capital value of any Defined Benefit pension plans.

Your pension is 'tested' against the Lifetime Allowance when certain trigger events occur. These include:

• When you move money into drawdown
• Death
• When lump sums are paid, including those paid in the event of ill health
• If you choose to transfer your pension fund to a qualifying recognised overseas pension scheme (QROPS)
• If your pension increases beyond a certain limit
• In some cases, when you reach the age of 75

If your pension value is above the Lifetime Allowance, the value by which it is over the threshold will be subject to tax at:

• 55% of lump sums
• 25% of pension income

Who will benefit from the increase, and how?

The rise in the Lifetime Allowance will affect most people who are saving, preparing and already receiving, their pension.

For those in the early stages of saving toward retirement, the increase should offer increased possibilities to make the most of your pension funds, in the future, whilst minimising the amount you lose in tax. Of course, the Allowance is not guaranteed to continue rising indefinitely, but this rise does signal an improvement.

If you will be reaching retirement age in the next few years, the rise could not have come at a better time for you. When your funds are crystallised, the total value will be checked against the new, higher rate. This means that you will be able to keep more of the money you have worked hard to save.

For those who are already retired and receiving their pension in some way, the Allowance rise will offer more flexibility in the amount you can access before incurring tax. However, if you have already exceeded the Lifetime Allowance, the rises will not affect you and it is best to seek professional advice to see how you can manage your remaining pension funds as tax-efficiently as possible.

For more information on how this affects you and tax-efficient methods of saving, contact us.

Please note:

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

by danielashby

Putting off taking financial advice could be a costly mistake

Have you ever talked yourself out of seeking professional financial advice?

You are not alone, almost half (49%) of over-50s who are not yet retired have done the same thing. But, with research by Dunstan Thomas showing that those who take financial advice could enjoy £13,000 more each year in retirement than those who don't, it is worth challenging that decision.

Why do people avoid taking professional financial advice?

According to research from Retirement Advantage, cost and trust are the top factors deterring over-50's from seeking professional advice. In a study of people who had yet to retire:

• 42% said that the cost of financial advice put them off
• 31% do not feel that they can trust financial advisers
• 31% do not think that taking financial advice is necessary
• 18% do not think that financial advice will benefit them
• 15% said that they can get the advice they need directly from their pension adviser

Where else do people turn for advice?

Rather than seeking advice from a professional, respondents said that they have, or will, get their information from:

• The internet (44%)
• The Government's Pension Wise guidance service (42%)
• Their pension provider (35%)
• Their employer (18%)

There is a range of great information available on the internet for those who want to understand their finances and options better. However, this information is very generalised and will not be tailored to your own needs and circumstances. The same is true for the Pension Wise guidance service, they are in place to give you the facts, not recommendations.

Consulting your pension provider may seem like a logical decision, but bear in mind that they are a business. As a business, their main aim is to retain you as a customer and ensure that you keep your money in a place where they can benefit from it. That means that they are unable to make recommendations of more suitable products from other providers, as they are restricted to their own range.

Unless they work as a financial adviser or planner, your employer is not qualified to give financial advice.

Is financial advice worth the cost?

In short, yes.

When compared to other sources of financial information, independent financial advice is priceless. Whilst guidance and facts are available in abundance, both online and through guidance services, it does not compete. Financial advisers and planners work to get to know your situation, then suggest strategies, services and products which work both with you and for you, to help you to reach your financial goals.

The advantages of taking independent financial advice include:

• Unbiased information: The advice you receive from an adviser will not be designed to sway you toward a particular provider or products
• Ongoing education: Financial advisers work hard to keep their knowledge up to date. That means that any information they give to you is guaranteed to be correct, whether financial, legal or product-based
• Experience: Your financial adviser will be able to make applications, handle paperwork and communicate with other professionals in a very efficient way. It is common for those who choose to undergo complex financial processes alone to get confused or take longer than those with help
• Protection: As financial advisers are regulated by the Financial Conduct Authority (FCA), you get peace of mind, knowing that you are supported in the event of unexpected issues

It is vital to ensure that you do not view the value of financial advice on the cost alone. Consider the value of an ongoing relationship with a professional who is available to help you to make complex, and sometimes, life-changing decisions when you need them.

If that is not convincing enough, Unbiased.co.uk has found that people who take financial advice boost their assets by £41,099, on average.

For more information and to find out how we can help you, please get in touch.

by danielashby

Families to pay an extra £900m Inheritance Tax by 2022

The Office for Budget Responsibility (OBR) has revealed figures which show that the estimated Inheritance Tax (IHT) payable on estates over the next five years is due to rise by almost £1 billion; from £32.4 billion to £33.3 billion.

This rise is due, in part, to a larger population; more people are dying, therefore more IHT is being paid.

However, other research shows that an improved understanding of IHT regulations could result in many people paying less IHT. Currently, the figures show that, due to a lack of knowledge, IHT is being taken from estates which could have otherwise been avoided.

More information needed

A worrying number of people do not know how the assets that they leave behind will be affected by IHT, according to research from WAY Investments. In fact, almost half (48%) described their understanding of IHT as 'not very good' or 'terrible'. Meanwhile:

• 25% did not know whether their assets would incur IHT when they die
• 48% did not know that IHT can be as high as 40%
• 22% did not know that ISAs can be subject to IHT

As well as lacking information and understanding surrounding IHT, many people showed that they are very disorganised where their assets and estate are concerned. When asked if they had made and updated their will:

• 35% admitted that they do not have a will
• 47% of people who do have a will, have not updated it within the past five years

What difference does it make?

The advantages of knowing how IHT will affect your assets should be obvious. If you know how your estate will be taxed, it is easier to make tax-efficient arrangements. That way, you can leave more for your loved ones and lose less to the taxman in IHT.

Similarly, ensuring that you have a will and keep it updated and valid ensures that your estate is distributed according to your wishes. Without a valid will, your assets will be distributed according to complex intestacy laws, which will lead to two things:

1. Your assets will not necessarily be given to the people you would choose to benefit from them
2. Your assets may be divided in a way which is not the most tax-efficient. This will mean that your loved ones will lose more than is necessary in tax and will benefit less from the savings and property that you leave behind

Avoiding unnecessary IHT

Making sure that you have IHT-efficient plans in place for your estate is better done sooner rather than later. Unfortunately, none of us has a crystal ball, and whilst we would all like to believe that we will live forever, we do not know what is around the corner.

Seeking professional financial advice is the first step toward mitigating as much IHT as possible. We can help you to explore the ways in which IHT will affect you, and find solutions which ensure that your loved ones see the benefits of your legacy.

For more information, please take a look at our free resources on our 'Focus On' page of this website. Alternatively, feel free to get in touch.

Please note:

The Financial Conduct Authority (FCA) does not regulate Tax Planning and Estate Planning.

by danielashby

Autumn Budget 2017: Were you a winner or a loser?

Every Budget has winners and losers; with some people faring better than others.

So, how did you fare? Read on as we reveal whether you are a winner or a loser after Philip Hammond's second Budget of 2017.

Winners

First-time buyers

Those buying a home for the first time will now benefit from the abolishment of Stamp Duty on homes up to the value of £300,000. To ensure that this can help first-time buyers in high value areas, such as London, the first £300,000 will be exempt from Stamp Duty on homes above this value to a maximum of £500,000.

The Chancellor said that this would mean: A Stamp Duty cut for 95% of all first-time buyers who pay Stamp Duty.

Under 30s who travel by train

The 16-25 railcard will now be available to people aged up to 30. The so-called 'Millennial Railcard' will be available next year, and will offer savings of up to a third off non-peak fares.

Whilst the railcard won't provide savings for regular commuters travelling in peak times, it will benefit people travelling at less busy periods.

People claiming Universal Credit

Measures will be put in place to support those claiming Universal Credit, such as the removal of the seven-day waiting period for benefit claims. This means that benefits will be paid on the day of the claim, giving families access to money for rent payments. Advances will also be able to be applied for online, and the repayment period for advances will increase from six to 12 months.

Any new claimant in the receipt of housing benefits will continue to receive them for two weeks, meaning that benefits aren't lost in the crossover period.

People earning the National Living Wage

The National Living Wage will be increased by 4.4%, rising from £7.50 per hour to £7.83 per hour. This will take effect from April 2018.

Taxpayers

From April 2018, the tax-free Personal Allowance will be increased from £11,500 to £11,850.

The higher rate threshold will be increased from £45,000 to £46,350.

People saving into pensions

For once we had a Budget where no changes were announced to pension tax-relief or allowances.

Drinkers

The duty on ciders (except white cider), wines, spirits and beer will be frozen, meaning those buying alcoholic drinks will see no price increase next year.

Air passengers

From April 2019, short-haul Air Passenger Duty rates and long-haul Air Passenger Duty rates will be frozen. This will be paid for by an increase on Premium class tickets and private jets.

Drivers

The scheduled fuel duty rise for both petrol and diesel vehicles in April 2018 has been cancelled. This is expected to save a typical driver £160 per year.

Small businesses

The VAT threshold for small businesses has been maintained for the next two years at £85,000.

A planned business rate switch from RPI to CPI has been brought forward by two years, to April 2018. This is expected to reduce the burden of business rates by an extra £2.3 billion.

Pubs

A £1,000 business rate discount will be made available to pubs with a rateable value of less than £100,000 for one more year, to March 2019.

Homeless people in the West Midlands, Liverpool and Manchester

A £28 million pilot scheme will aim to tackle the problem of people sleeping rough in the West Midlands, Manchester and Liverpool.

House builders

Over the next five years, £44 billion in capital funding, loans and guarantees will be allocated to deliver 300,000 new homes per year. This includes £1.5 billion to help smaller firms build more houses.

GCSE computer science students

The number of trained computer science teachers will be tripled to 12,000, with the aim to place a fully qualified GCSE computer science teacher in every secondary school.

Anybody charging their electric car at work

A new £540 million charging infrastructure fund will support the growth of electric cars. This will provide more charging points, especially at places of business.

New tech businesses

£20 billion of new investment has been unlocked for UK-based businesses in the technology sector. This consists of a new fund of £2.5 billion that has been allocated for emerging UK businesses, designed to replace European investment funds post Brexit.

Losers

Economy

The Chancellor started his speech by revealing a series of forecasts showing growth in the economy is expected to be significantly lower than predicted earlier in the year.

Diesel car drivers/ businesses

Drivers of diesel cars, which do not meet the latest pollution standards, will see their Vehicle Excise Duty (VED) rise by one band in April 2018.

The existing diesel supplement in company car tax will rise by 1%, the proceeds from which will be used to create a new £220 million Clean Air Fund.

Premium and private air travellers

Increase in prices for premium and private air travel to compensate for a freeze on duties for short-haul air passengers and long-haul economy air passengers.

Employers

The National Living Wage for those aged 25 and over will rise by 4.4% to £7.83 per hour from April 2018.

Smokers

The duty on tobacco, hand-rolled tobacco and the minimum excise duty on cigarettes, which is due to be introduced in March, is set to rise by 2% above the Retail Price Index (RPI) inflation.

People selling their business

Freeze for indexation allowance on Capital Gains Tax. Companies will receive relief until January 2018.

Empty property owners / investors

Local authorities will be given the power to charge a 100% council tax premium on empty properties.

Here to help

If you have any questions about today's Budget please call us on the usual number; we are here to help.

by danielashby

Autumn Budget 2017: Everything you need to know

The Chancellor, Philip Hammond rose to his feet at 12.38 to deliver his second Budget of the year.

The days leading up to the Budget have been dominated by talk of housing, Universal Credit and, most surprisingly, rail cards.

Mr Hammond started in a bullish and optimistic mood, saying: I report today on an economy that continues to grow, continues to create more jobs and continues to confound those who seek to talk it down. He then turned to Brexit, saying that the UK will be prepared for every possible outcome of the current negotiations.

As convention dictates, the Chancellor then moved on to the latest economic data and forecasts for the years to come.

The economy

The Chancellor confirmed that:

• Gross Domestic Product (GDP) has been substantially revised down, and is now predicted to grow by 1.5% in 2017, 1.4% in 2018, 1.3% in 2019 and 2020, 1.5% in 2021, 1.6% in 2022
• Inflation, as measured by the Consumer Prices Index (CPI), will peak at 3% in this quarter, while the Bank of England's inflation target will remain at 2%
• Borrowing will continue to fall in years to come, to reach its lowest level in 20 years in 2022 / 23 when it will be £25.6 billion. This year, borrowing is predicted to be £49.9 billion; £8.4 billion lower than forecast in the Spring Budget

He then moved on to a raft of announcements.

Research and Development (R&D)

Mr Hammond said: "We are allocating a further £2.3 billion for investment in R&D (research and development) and we'll increase the main R&D Tax Credit to 12%."

Tech businesses

The Chancellor said that a new tech business is founded in the UK every hour; he said he wanted that to be every half hour.

To help achieve that aim, Mr Hammond unveiled a range of measures, including a new public fund and an improvement in EIS (Enterprise Investment Schemes) tax-relief for investments made into 'knowledge intensive' companies.

Cars

It was announced that people who drive an electric car, and charge it at work, will not face benefit-in-kind tax charges. Furthermore, a £400 million charging infrastructure fund was also unveiled.

Older diesel cars will face higher road-tax. Although Mr Hammond was keen to point out that no white van man or white van woman will have to pay the increase.

Environment

Referencing the BBC's Blue Planet programme, Mr Hammond announced that the Government will explore new taxes on plastic waste.

Education

Mr Hammond announced measures to promote maths teaching in schools, including a £600 payment to schools and colleges for each child who studies A-Level or core maths.

Universal Credit

Mr Hammond said that Universal Credit was a necessary and long-over due reform, where work always pays and people are supported to earn.

However, he went on to announce several key changes:

• The seven-day waiting period will end
• The system will change so that households can get an advance for a full months' payment within five days
• People claiming an advance will now have 12 months to repay it

Mr Hammond said this was a £1.5 billion package to help people with the change to Universal Credit.

National Living Wage

The National Living Wage, for people aged 25 or over, will increase from £7.50 to £7.83 from April 2018; a £600 per year rise for full-time workers.

Income Tax

Mr Hammond announced that from 6^th April 2018 the Personal Allowance, the amount which can be earned before income tax is paid, will rise to £11,850 from £11,500 in the current tax year .

The higher-rate tax threshold will also rise to £46,350 from the same date.

No changes were announced to the rates of Income Tax.

Alcohol & tobacco

Duty will be frozen on wines, spirits, cider (except white cider) and beer.

The cost of tobacco will rise by inflation, plus 2%.

Travel

A new railcard for people aged 26 - 30 will give a third off rail fares.

The Chancellor also announced that the scheduled rise in fuel duty, due to take effect in April 2017, will be cancelled.

Also, short-haul Air Passenger Duty will be frozen. However, there will be an increase on premium class tickets and private jets.

NHS

Mr Hammond spoke of the Government's commitment to the NHS.

He then announced an additional £10 billion of capital investment, as well as £2.8 billion, day-to-day funding over next three years.

Corporation Tax

The Chancellor announced no changes to the rates of Corporation Tax.

Business owners

Mr Hammond said: "There is a case now for removing the anomaly of indexation allowance for capital gains - bringing the corporate system into line with personal capital gains tax. I will therefore freeze this allowance."

This measure will increase the tax bills paid by people selling their business.

Pensions

Despite the usual speculation, and for the first time in many years, the Chancellor announced no significant changes to pension legislation, tax-relief or allowances.

There's no doubt that will come as a relief to those people using pensions to plan for their retirement.

VAT (Value Added Tax)

Despite pre-Budget speculation, the Chancellor announced that the VAT threshold will remain frozen at £85,000 for the next two years.

However, a consultation on the structure of VAT was also announced.

Small businesses

The way in which business rates are increased each year will change.

From 2018, they will now rise in line with CPI (Consumer Prices Index) and not RPI (Retail Prices Index) saving £2.3 billion.

Housing

In perhaps the largest section of his speech Mr Hammond said: Getting on the housing ladder is not a dream of your parents' past but a reality for your future.

He then outlined some of the Government's accomplishments, but was clear that there is more to do to increase house building and help younger people onto the housing ladder.

Mr Hammond announced a £44 billion package of funding, loans and guarantees to help the housing market.

He also announced local authorities will now have the power to charge a 100% Council Tax premium on empty properties.

Finally, new measures to combat homelessness and rough sleeping were also announced.

First time buyers

The Chancellor announced that, from today, Stamp Duty will be abolished for all first-time buyer purchases up to £300,000.

To help first-time buyers in high price areas no Stamp Duty will be payable on the first £300,000 on property purchases up to £500,000. This is a stamp duty cut for 95% of all first-time buyers who pay stamp duty.

Here to help

If you have any questions about today's Budget please call us on the usual number; we are here to help.

by danielashby

Interest rate rise: How will it affect you?

It's taken more than 10 years, but it's finally happened.

The Bank of England has decided to increase interest rates with the Monetary Policy Committee (MPC) voting by 7-2 to increase base rate from 0.25% to 0.5%, principally in response to inflation hitting 3%.

The rise was modest, not that you would have thought so from the acres of coverage it got, and only takes rates back to where they were in August last year. However, with inflation stubbornly above target, it is probably a sign of things to come.

As the hysteria dies down, it's only natural to ask: how will this affect you? And, when can we expect further rate rises?

How will you be affected?

Homeowners with a variable rate mortgage: If you are one of the 3.7 million (Source: Bank of England) people with a mortgage arranged on a variable or tracker rate, you can expect to see your payments rise.

Over the coming weeks your bank or building society will be in touch to let you know how much more your mortgage will cost each month.

Homeowners with a fixed rate mortgage: Those people with a fixed rate mortgage won't be immediately affected by the rate rise. However, when their current mortgage deal comes to an end, the products available will reflect this, and any subsequent increases.

People with unsecured debt: The increase of 0.25% is relatively insignificant compared to the interest rates charged on some unsecured debt, especially credit cards and payday loans. Furthermore, the average interest rate charged on a personal loan is just 3.7%, half that of 10 years ago (Source: BBC).

However, it should serve as a wake-up call for those people with large amounts of unsecured debt; with further rate rises expected, now is probably the time for consumers to consider reducing their indebtedness.

Savers: Mark Carney, the Governor of the Bank of England, made it clear he expects the rate rise to be passed on to savers in full. However, such a modest rise will do nothing to bring a real return, where the interest rate exceeds inflation, any closer for savers.

Future pensioners: Although less popular than in years gone by, anyone planning to use an Annuity to turn their pension into an income can expect rates to rise slightly as a result of the increase to interest rates.

When can we expect further rate rises?

Mark Carney isn't known for the accuracy of his crystal ball. However, he believes interest rates will have to rise twice more over the next three years.

The uncertainty over Brexit, inflation and the wider economy means this prediction must be treated with some scepticism. However, it's clear that if inflation continues to remain above the Bank's target of 2%, interest rates will have to rise further.

No need to panic

The increase of 0.25% is modest and won't, immediately at least, affect anyone with a fixed rate mortgage.

However, there's no doubt it's symbolism or that it is potentially a sign of things to come. That means mortgage borrowers, many of whom will have never seen an interest rate rise, should start to prepare for future rate rises.

If you are considering your mortgage and lending options in light of this rate rise, Beaufort Capital Solutions is a new, dedicated financial solutions service, designed for the exclusive use of Beaufort Group partners and professional connections; providing assistance across a vast range of financial requirements for clients; from residential, to commercial, to business finance - on an advised or referred basis.

For more information, please visit:www.beaufortcapitalsolutions.co.uk

by danielashby