UK interest rates have been at the
record low of 0.5% since March 2009.
Although recent growth in the
economy has led many to
suggest that rates will rise again,
the continuing low inflation level,
gives little reason to raise the cost
of borrowing.
Indeed, the Bank of England hinted
interest rates won’t rise until
Spring 2016.
A great time for borrowers
The low interest rates have helped banks and building societies keep prices down on mortgages.
Data from the Bank of England shows the average two-year fixed rate for a borrower with a 25% deposit is now 2.01%*. This is down from 3.11% in January 2013.
The average five-year fixed rate mortgage for someone with a 25% deposit stands at 3.09%*. The average rate on a 10% deposit mortgage stands at 3.79%, while the average rate on 5% deposit is 4.79%*.
Get the right advice
While banks and building societies are competing for your business, you need to be aware of the fees which may make the overall price more expensive.
While it may be cheaper than ever to get a mortgage, borrowing has become harder since new affordability rules were brought in during April 2014. The new rules require lenders to look more closely at outgoings too.
As well as pay slips and bank statements, details of regular payments such as haircuts, holidays and childcare could be required on your application.
Rethink your savings plans
The rock-bottom interest rates mean savers are not getting such a great deal. You need to make sure you put your money in the right type of account with the best rate.
One option is to use your yearly ISA Allowance. A cash ISA is simply a savings account where you don't pay tax on the interest. As of 6 April, savers can put up to £15,240 into their ISA and if you opt for an easy-access ISA you can take the money out whenever you like.
Whether you are looking for your first home, a bigger house or just to remortgage, or you want to know more about your saving options including ISAs, talk to us and you’ll get the advice you need to get a great deal.
*Correct at 10 February 2015
Low rates, why wait?
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
A fee of £495 may be payable on completion
C O PEN 96 1 Exp . 0 1/ 10 /2 01 5 Issue 11 Spring 2015 Downton and Ali Associates
Financial
Viewpoint
Landlords and lending
What you need to know
Ongoing
running
costs
Like your own home, a Buy to Let property will require maintenance and you’ll need to maintain the safety of gas and electrical appliances.
You might think of using a letting agent to market your property, select tenants and manage the property. A letting agent will typically charge around 10–15% of the monthly rental for this service.2
Your tenant will normally be responsible for most property related costs such as Council Tax, a TV Licence and utilities. The tenancy agreement should clearly set out who is responsible for each of these payments.
Don’t forget to budget for insurance. Specialist buildings and contents insurance for landlords is essential, but you should also arrange cover to protect you against loss of rental income.
The National Landlords
Association (NLA) claims
that so-called ‘part-time’
landlords now make up
more than 70% of the
private rented sector.
1If you’re planning to buy a
rental property as a long-
term investment, or to
generate a regular income,
here are a few points you
may want to consider
before you get started.
Buy to Let mortgages
You’re likely to need a Buy to Let mortgage to finance your property purchase. Buy to Let Mortgages are not regulated by the Financial Conduct Authority, but the lender will still be
looking for you to meet a number of requirements.
Typically, the lender will expect you to:
● Provide accurate information about your financial circumstances
● Understand the legal implications and commercial risks of being a landlord ● Read and understand its Buy to Let offer
pack, and the terms and conditions ● Understand that you, not your tenant,
are responsible for meeting mortgage payments
● Understand that non-payment of the mortgage may put the wellbeing of your tenants at risk and could lead to the property being repossessed
They will also expect you to let them know if your circumstances change and you decide to occupy a property.
Mortgage costs
Mortgage interest payments are likely to be your largest ongoing cost, and most lenders will want to ensure that the rental you earn from letting your property easily covers your mortgage commitment.
You’ll also need to consider the lender’s arrangement fee. This can often be added to your mortgage, which means you will pay interest on it, but this can normally be offset against your tax liability.
Purchase costs
If you’re funding your purchase with a mortgage, you will still need to find a deposit from elsewhere. Depending on the condition of the property, you may have to undertake structural or decorative work. You’ll also have to budget for furniture and appliances if you intend to let your property furnished. Other costs will include legal fees, Stamp Duty Land Tax (if appropriate) and a survey fee.
1 National Landlords Association, 10 July 2014 2 www.which.co.uk, November 2014
COPEN924 Exp. 17.12.2015
If you’d like more information on how to fund and protect your Buy to Let investment, please get in touch.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
A fee of £495 may be payable on completion
What’s your
deadline to
the breadline?
1 Legal & General’s Deadline to the Breadline Report 2014
Research from Legal & General has
revealed how quickly your money
might run out if your household’s
main breadwinner died, or became
unable to work due to long-term
sickness or a critical illness.
The insurer found that, on average, working
age families in the UK have just two weeks before
becoming totally reliant on state benefits, friends
or family1.
Research results for the UK suggest that those in Wales are most at risk, being an average of just seven days from the breadline. Those in Scotland (17 days) and Northern Ireland (19 days) are also among the most vulnerable.
The best-prepared region of the UK is Greater London where households are, on average, 83 days away from the deadline.
Your savings
The average UK household has just £1,205 in savings and 35% of households admit to having no savings at all. Unforeseen events, ranging from illness to redundancy, often lead to a sudden loss of income, which means that over a third of UK households would not have enough cash to maintain their standard of living.
Making cutbacks
The research also showed that three quarters of households worry about a rise in the cost of living. A rise of just 1% in mortgage interest rates would mean that households would no longer be able to save each month and would have to change their spending habits or rely on existing savings to make ends meet. A rise of 2% would move them one day closer to the breadline. Shockingly, more than a quarter of those surveyed admitted they did not know where they’d be able to make cutbacks to find extra money.
How can you protect yourself?
If you were left without an income, you may be
surprised how quickly your savings could be swallowed up by things like rent or mortgage payments, bills and other financial commitments. A protection policy can help ensure your financial commitments are taken care of if you, or your household’s main breadwinner, suffered a sudden loss of income.
If you'd like advice on how to protect your finances, or you’d like to review your protection needs, please get in touch.
Would you
lose your
home if you
lost your
income?
Buying a new home is probably one
of life’s biggest and most exciting
events. It’s also a big financial
commitment – one that could be
with you for 25 years or more.
Your ability to maintain your mortgage payments relies on a constant income, so how would you continue to make your mortgage repayments if your income was reduced – or stopped?
Why gamble on your future? You are far more likely to suffer a serious illness than see your numbers come up.
Winning national lottery jackpot: 1 in 14 million chance1
Thinking about the bad things that could happen – death, serious illness, injury – isn’t pleasant, especially when we feel fit and healthy.
But by confronting the reality that it could happen to you, and putting plans in place to deal with it, you can give yourself extra peace of mind today and make sure you and your family are financially protected if the unthinkable ever happens.
A report by Macmillian Cancer Support showed that 4 in 5 people with cancer are affected financially.4
There are a range of products available that can provide a lump sum or a regular income on death, or diagnosis of a critical illness, and they could cost less than you think. Choosing the right plan is important – especially if you already have some cover in place. This can be reviewed and we can determine if the cover is still appropriate. Please get in touch so that we can assess your circumstances and the cover options available to you.
1http://www.theguardian.com/uk-news/2014/nov/17/national-lottery-numbers-20-years-
katie-price-win-jackpot
2http://www.worldstrokecampaign.org/learn/the-facts-behind-1-in-6.html
3
http://www.cancerresearchuk.org/cancer-info/cancerstats/incidence/risk/statistics-on-the-risk-of-developing-cancer
4Macmillan Cancer Support – Cancer hidden price tag report (2012)
Having a stroke: 1 in 6 chance2
Getting diagnosed
Offset mortgages explained
Offset mortgages may
be familiar in name –
but do you really
understand their
features and benefits?
Here’s a quick guide.
Why might you choose an Offset mortgage?
Taking out an Offset mortgage enables you to use your savings to reduce your mortgage balance and therefore the interest you pay on it. For example, if you borrowed £200,000, but had £50,000 in savings, you would only be paying interest on £150,000. Offset mortgages can be more expensive compared to a standard deal, but they can help to reduce your monthly payments, whilst still giving you access to your savings.
Advantages
● As you pay less interest, Offset mortgages can help reduce your monthly repayments, or enable you to repay your loan early.
● You maintain access to your money, should you need it.
● Deals can be quite flexible, allowing you to offset savings and current accounts against your mortgage.
Disadvantages
● Money held in Offset accounts won't earn you interest.
● If you don't have much saved, you won't save much on the mortgage, meaning it may be better choosing an alternative deal with a lower interest rate.
● Offset mortgages are usually more expensive than standard deals.
When is it worthwhile?
If you have a mortgage rate that is higher than your savings rate (after tax), you may find yourself better off by offsetting – even if you don’t have a high savings balance.
In addition, you have the added security of being able to access your savings at any time (unlike making overpayments on a traditional mortgage).
An Offset mortgage may be even more appealing if you’re a higher rate tax payer. As there is no interest paid on the money in an Offset savings account, there is no tax liability. Offset mortgages can offer real financial benefits if you have a mortgage and some savings. By seeking professional advice, you will gain a clearer picture about whether it’s the right choice for you.
What is an
Offset mortgage?
Usually linked with one bank account (but sometimes more), an Offset Mortgage allows the money in your savings account to be counted as temporary overpayments towards our mortgage. However, your savings remain accessible so you can still get to them if you need to.
COPEN926 Exp. 17.12.2015
To discuss your mortgage needs, please get in touch.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
A fee of £495 may be payable on completion
The most valuable gift
you can buy?
Life and Protection Insurance
policies (sometimes known as
‘Family Protection’) offer a financial
safety net for you and your loved
ones, should the worst happen.
They can provide a regular income or cash payout to ease the financial burden of:
● death
● serious injury or illness
● unemployment (as an additional cover with certain policies)
Which policy is right for you?
Life Insurance can provide financial security to those who depend on your income when you die. It could pay off your mortgage, or provide an income to help cover things like regular household bills.
The most appropriate type of Life Insurance will depend
on your circumstances
●Term Insurance pays out a lump sum if you die within
the agreed ‘term’ (the amount of time you have chosen to be covered for, eg. 20 years).
●Whole of Life Insurance pays out a lump sum when
you die, whenever that is, as long as you are still paying the premiums.
●Family Income Benefit Insurance pays out a regular
income, instead of a lump sum, to provide ongoing financial support for those who depend on you.
Critical Illness Insurance pays out a tax-free lump sum
on the diagnosis of certain life-threatening or debilitating conditions, like cancer, heart attack or stroke.
You may decide to buy Critical Illness Insurance when taking on a major commitment, like a mortgage or starting a family, but it can be bought at any time to provide peace of mind.
Income Protection Insurance pays out a regular,
tax-free income if you become unable to work because of illness, injury or unemployment. It could help you keep up with your mortgage or rent payments, as well as other living costs, until you’re able to return to work.
Things change – and so should your cover
You may already have one or more of the above in place, but it’s still worth reviewing your current cover levels. Personal circumstances can change regularly so it’s important to ensure your level of cover remains appropriate.
COPEN929 Exp. 17.12.2015
Contact us today for a Life and Protection Insurance review.
Downton & Ali Associates brian@downtonandali.co.uk 02030210075
The outgoings we face today just
to keep on top of the mortgage or
rent, utilities, food and other regular
commitments such as loans and
childcare costs, can be significant.
So it’s important to plan for the
unexpected and avoid making
a potentially costly mistake.
We might worry about how we would pay the bills and look after our families if we were to have an accident, but the truth is many of us don’t have cover in place to protect against it. With 30% of households admitting they wouldn’t be able to pay their mortgage if they were to unexpectedly lose their income1, it’s clear there’s a real
risk of serious financial hardship if income stops - even for a short time.
The importance of
appropriate protection
Most of us buy travel insurance when we go on holiday. We insure our pets against illness and the sometimes eye-watering vets bills this can incur. We insure our mobile phones, washing machines, gadgets and cars.
But all of these expenses need to be funded from somewhere, and if a sudden event affects our personal cash flow, it would be hard to see how we could keep these other insurances going – let alone all the other outgoings. Swiss Re2 estimates that the average person is
underinsured by as much as £100,000, with single parents, couples with children and the under-35s the most likely to not have the right cover. That is just an estimate – it could be higher and the pressures on average incomes mean it probably is.
Is it time to review your circumstances?
There is real value in taking time to regularly think about your personal circumstances. As you go through life, your lifestyle will change and so too will your need for protection. There are a number of affordable protection products
available that give you peace of mind in knowing your finances would stay intact. These include life and critical illness cover, income protection, insurance aimed specifically at hospital stays and treatments, as well as accident protection.
What’s your personal
financial wellness plan?
1HSBC Survey 2015
2http://www.swissre.com/media/news_releases/nr_20120611_Term_Health_Watch.htm
Make a commitment to your own financial wellness and talk to us about life and protection insurance tailored to your circumstances.
Home insurance top tips
Get on top of things
Make sure you know where your money is going. Many people don’t keep track of their direct debits and if you’re one of them, you could be paying for insurance policies that you no
longer need.
Dig out those certificates of cover and policy documents, and check your cover levels so you know exactly what you're paying for.
Ask us to review your cover
We could help you reduce your outgoings, identify instances where your protection could be improved or uncover gaps in your insurance.
We can also help you understand what you’re covered for – and what you aren’t. While buying home insurance may feel like an expensive chore, it’s critical to ensure it meets your needs and
expectations. If you don’t fully understand your policy excesses (the contribution you are required to pay towards a claim) and policy exclusions (such as accidental damage), your insurance could end up letting you down when you need it most.
Alternatively you may not even realise you actually require specialist insurance. If your home is classed as a ‘non-standard construction’, or you have high-value contents in the home, it may be appropriate to call in a specialist insurance provider that can meet your needs.
Have a backup plan
As part of this process, take the opportunity to review your other insurance arrangements, including your family and income protection.
Research from insurer Legal & General1 suggests
that if you were to lose your regular income, you would – on average – have less than four weeks until your money ran out. Respondents to the same Legal & General survey believed they could last an average of 77 days without an income – almost three times longer than the reality of 29 days.
It can be easy to question the value of insurance – until the day you need it most.
If you’ve ever been unfortunate enough to make an insurance claim, you’ll know just
how valuable it can be.
We can help you understand how the right insurance can help protect you, your home
and those you care about most.
1
2
3
General Insurance is an important part of any financial plan, and you should
make sure you review your cover regularly. We’ve come up with three tips to
help knock your insurance into shape.
COPEN935 Exp. 17.12.2015
Downton and Ali Associates
Downton & Ali Associates Dartford Business Park Victoria Road Dartford DA1 5FS 02030210075 brian@downtonandali.co.uk www.downtonandali.co.uk
If you’d like help reviewing your insurance needs, please get in touch.
