Your Finances post-Brexit
29 Jun 2016 | COMMENTS: 0 | Author: Carlo Ruggiero | General
Politicians squabbling amongst themselves. The ‘Leave’ campaigners still without a plan. It’s clear Brexit has left a huge section of the UK population in shock – including those in charge.
While the true repercussions of the UK’s planned exit from the EU are yet to be seen, the British public will understandably have concerns over their finances – particularly following Friday’s market crash.
But for the general public, what can you expect in the weeks and months following this monumental decision?
Note: None of this constitutes formal financial advice – for that you’ll need to speak with a financial advisor who can personally assess your own circumstances.
UK interest rates are now expected to be slashed to zero – down from current lows of just 0.5%. The intention is to get people spending and prop up the economy in the wake of the crash.
This is good news for borrowers, particularly mortgage holders, as rates should stay low. It’s not so great for savers, as there’s no incentive to squirrel your money away if it’s gaining no growth.
By leaving the EU, it’s likely to mean buying goods or services from abroad will become more expensive. Unfortunately, because the value of the pound has also taken a dip, our exports are now worth less to international buyers. This will lead to an increase in inflation as those increased costs are passed on to us.
As the price of goods and services rise, there’s less disposable income for us each month.
The pound’s value fell to its lowest level in 31 years immediately following the results of the EU referendum. For the standard household, this obviously means any foreign holidays become more expensive.
If you’re a homeowner, this decision could have huge repercussions. The Treasury has said house prices could fall anywhere between 10% and 18%. Homes in London are expected to feel the biggest impact, losing £7,500 in value on average. Outside of the capital, the expected loss is around £2,300.
However, with prices falling, and interest rates expected to fall too, this could be good news for first time buyers.
This one is still up in the air. George Osborne originally warned that leaving the EU would trigger tax rises – 2p on the basic 20p to the pound rate, and 3p on the higher 40p tax rate.
Despite his warnings, with leadership of the Conservative party now also an unknown, it’s hard to say whether tax rates will be increased. Osborne has still stated that increases are likely, and ‘the country is going to be poorer’ because of the EU decision, though we’ll have to wait a few months to know whether this is the case.
Many people are asking how their finances will be affected, and if there’s anything they can do to shield themselves from any major negative financial impact.
In these uncertain times, the most sensible word seems to have come from Martin Lewis of Money Saving Expert.
“The most important thing to do is act as normal. If people start entrenching then there will be economic problems…
“While it may sound strange, last week we were uncertain over whether things would be uncertain. At least now we know. And as we had to in the financial crisis of 2007, people will adapt and get used to that uncertainty.”
Again, this does not constitute formal financial advice. If you are worried, a meeting with a financial advisor should be able to set your mind at ease.