Brexit and how it will affect your finances

Brexit has been very much the topic of conversation for the past three months and whether you voted for the UK to Leave or Remain in the EU, is now water under the bridge. We are all now part of a waiting game to see how things unravel in the coming weeks, months and maybe even years.

These are considered times of uncertainty; politically, economically and financially. What are the consequences of Brexit for our currency, our mortgages, our house prices, taxes, pensions, investments and savings?

Impact of Brexit on currency

We have already seen a serious tumble in the value of Sterling due to the uncertainty of Brexit, falling to it’s lowest since 1985. In recent days this has started to stabilise again agains the US dollar, however with the credit rating down and global stock markets already in turmoil, it could be a while before investors regain confidence in the UK economy.

Rises in inflation are expected, increasing the price of goods and services, which essentially means less money in your bank at the end of the month.

Impact of Brexit on mortgages

Anyone that has a mortgage may be concerned that the cost of their monthly payments may rise following Brexit. The Remain campaign estimated an average mortgage could cost £1,000 more if the UK leave the EU, due to an anticipated rise in interest rates to counter inflation.

However, the Bank of England are now considering reducing rates even further than the current rock-bottom lows. This is to keep money circulating through the economy in times of need.

Home owners with a Tracker mortgage could see small cuts to their monthly payments. Those with a Fixed-rate mortgage may not see any change for now, however this period of cheap finance could be extended, depending on the Bank of England’s long-term strategy.

Impact of Brexit on house prices

If you own your own bricks and mortar, you may have been enjoying watching the value of your asset increase over the past few years. In almost all parts of the country, house prices have been escalating to new heights.

Brexit is expected to create changes in the housing market, linked to the cost of mortgages. London is suspected to be affected, with the International Monetary Fund (IMF), the National Association of Estate Agents (NAEA) and The Treasury predicting a fall in the coming two to three years.

If you are a first-time buyer, this could all be good news! Finally a break you have been waiting for.  Let’s see.

Impact of Brexit on taxes

There was talk during the campaigns that tax increases would be essential to meet the promised 2020 surplus. The Chancellor indicated there could be a 2p rise in basic rate tax, 3p rise in higher rate tax and a 5p rise in Inheritance tax if Britain opted “out”.

Tax rises are not considered likely. Although nothing is guaranteed, it would directly contradict the promises made in the previous election. However, the more obvious option would be an extension to the period of austerity.

The Institute for Fiscal Studies (IFS) predicts cost cutting for a further two years to counter balance the slowing of growth in the market due to Brexit.

Impact of Brexit on pensions, savings & investments

The Bank of England may take action with pension annuities as an alternative to cutting interest rates. Also, currently, there is an agreement for pensions to rise by the level of earnings, inflation or 2.5% percent per year, whichever is the highest. This could be under threat with Brexit, although it is too early to tell.

Anyone with savings will be caught amongst the rise or fall in interest rates. Unfortunately, most people are always hoping for cuts in interest rates to keep borrowing low, however those with savings always suffer on the other end of the spectrum.

As regards to investments, the UK is currently under scrutiny with investors as it holds too much uncertainty to generate returns. In time though this is likely to change and settle down.

Take advice in uncertain times

Everyone is a little in the dark about the financial future of the UK right now. However, the professionals will be doing their best to keep up-dated in their field of expertise, so to give the most accurate advice to those who need it.

If you had plans this year to move house, invest in a buy-to-let, make pension contributions, investments or savings, make sure you have done your homework before committing, as things may change frequently in the coming months.