Mortgage rates are on the up

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Mortgage rates are likely to rise again after the latest comments from the Bank of England, a rise in the Bank's base rate from 0.5% to 0.75% is likely in May, with another rise expected to follow in the Autumn. In addition to this, two government schemes that currently offer lenders access to cheap funding are due to end this year and the Association of Mortgage Intermediaries agree that these schemes have helped keep rates low in recent years.

In terms of interest rate rises, borrowers with variable rate mortgages or a tracker rate mortgages will be most affected as the monthly payment amount will increase. Those with fixed rate mortgages would not see an immediate rise in their monthly payments however, when such borrowers reach the end of their term, they may find they have to make higher monthly payments. That said, depending on when they took out their loan, they could end up on a cheaper deal due to the competitiveness of the fixed rate market.

In terms of the Funding for Lending Scheme and the Term Funding Scheme which were introduced by the government, most mortgage experts do not think that there will be an instant effect on mortgage rates due to the way the schemes are structured, but we may see rates gradually drift upwards. Of course, there is always the option for the government to extend one or both schemes as it has done previously if they perceive it is beneficial to do so.

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Online Investment Fraud - Keeping Yourself Safe

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If it sounds too good to be true, then it probably is. 

The Financial Conduct Authority (FCA) is warning the public about the increased threat of online investment fraud, particularly those offering investments in binary options, contracts for difference, forex and cryptocurrencies. These fraudsters are targeting the public online and via social media, so while potential scam victims have historically been the over 55's, the FCA's latest ScamSmart campaign found that those aged under 25 were six times more likely to trust an investment offer they received via social media. This shift in methodology by fraudsters comes as people have become more sceptical of cold calls and more people are online than ever before.

The websites and profiles that are used appear highly professional and can feature fake customer reviews, logos and statements. Prices on these types of fraudulent media are often fixed, tie people in with extreme pay-out clauses or do not place trades at all - once money has been handed over the fraudsters disappear leaving the investor with nothing.

Some of the warning signs that an investment opportunity may be a scam include:

• The promise of  'quick wins', guaranteed or high returns.
• Downplaying the risks associated with investing.
• Applying pressure to make a decision quickly, e.g. short availability periods.
• The offer of additional bonuses or discounts.

The FCA encourage the public to check its dedicated website www.fca.org.uk/scamsmart when considering any investment opportunity, and at the very least:

1. Reject unsolicited investment offers whether made online, via social media or over the phone.
2. Check the FCA Register to see if the firm or individual you are dealing with is authorised and check the FCA Warning List of firms to avoid.
3. Get impartial advice before investing.

Getting impartial advice before making any investment decisions is invaluable, and most financial advisers will be happy to discuss your investment needs at an initial meeting at no cost to the client. Personal recommendations from friends and family is a good way of finding an adviser, you can also find more information about finding a suitable adviser through the Money Advice Service. Ensuring that the individual or firm is authorised by the FCA also affords access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

The FCA have very good instructions on their website regarding the use of the FCA Register and Warning list, in particular you need to ensure that you:

• Always access the Register from their website, rather than through links in emails or on the website of a firm offering you an investment. 
• Check if the firm’s ‘firm reference number’ (FRN) and contact details are the same as on their Register.
• If there are no contact details on the Register or if the firm claims they’re out of date, call the FCA Consumer Helpline on 0800 111 6768.

If you suspect an investment scam the best thing you can do is hang up on any unsolicited cold-caller, delete the email or ignore the advert. You should also report it to the FCA at www.fca.org.uk/scamsmart or call them directly on 0800 111 6768, this will allow any potential scams to be investigated and added to the warning list. They will also be able to advise you on what to do next if you believe you have already been the victim of an investment scam, by speaking to your bank or investment provider (if you are transferring an investment, i.e. a pension) it may be possible to stop a transaction going through.

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Five reasons to consider a trust

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Most people understand trusts as a vehicle for mitigating or eliminating inheritance tax, but they are much more flexible than you might think.

1. Managing Assets

Some trusts are flexible and they can be tailored to individual situations. For example, for beneficiaries who do not have the capacity or wish to manage assets, for clients who cannot be trusted to own the asset outright or to avoid conflicts between heirs. Through a trust that is managed by trustees, assets can be distributed to the beneficiaries over time.

2. Protecting assets

Placing assets in certain types of trusts can protect them from creditors, marriage breakdown or from those who might influence beneficiaries. 

3. Flexibility

Some trusts offer clients the flexibility to make a gift into trust for chosen beneficiaries, but still continue to receive a benefit. Some trusts also allow the trustees to retain control beyond age 18, but without it being or becoming a discretionary trust.

4. Minimising tax

Most people understand trusts as a vehicle for mitigating or eliminating inheritance tax. Assets that are placed into trusts are given to the beneficiaries and are no longer part of the settlor's estate, provided the settlor survives seven years. Even if the settlor dies within seven years only the value of the gift is included within their estate, meaning that from day one the growth is outside.

5. Avoid probate

As assets within a trust don’t belong to the settlor, in the event of their death the value of the asset is not included in the estate for probate purposes. Also, when dealing with life policies the insurance provider will be able to pay the death benefit quicker as they can pay the surviving trustees (legal owners) and don’t require the grant of representation.


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Mortgage Conveyancing 101

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Once you have found a property and you have started the process of putting a mortgage in place, you need to select a conveyancer to process the legal side of purchasing a property. Conveyancing can be done by property solicitors and conveyancers and their job is to look after all the legal work once your mortgage offer has been accepted, this includes:

• Dealing with the Land Registry
• Stamp duty charges and payments
• Collecting and transferring money
• Providing legal advice and recommendations
• Drawing up and assessing contracts

Choosing a solicitor or conveyancer is extremely important and it is best to make sure you choose a firm that specialises in property transactions. We would always recommend that you ask your financial adviser to provide you with the names of reputable solicitors with whom they have worked alongside previously. This is by far the safest option. Your estate agent may also recommend their in-house service or an external company and this is also something you may wish to consider. Whatever you do, do not make your decision purely based on price. The firm you pick will be responsible for all of the legal work surrounding your property purchase, and if they miss anything or make a mistake, it could end up costing you a lot more than the amount you saved by choosing the cheapest service.

Conveyancing fees range from around £500 to £1,500, depending on the cost of the property and whether you're just buying, or selling one home and buying another. The cost will also depend on how complex the property transaction is and therefore how much legal work there is to do. A good solicitor will be able to provide you with a quote upfront so that you can see what exactly will be covered.


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Our Top 5 tips for Getting a Mortgage

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Taking out a mortgage is likely to be the biggest financial commitment you’ll ever make, so you'll want to find the best deal you can. And the good news is there’s plenty you can do to improve your chances of getting your mortgage application accepted.

1. Your credit score matters

Before applying for a mortgage, get a copy of your credit report which is held by credit reference agencies such as Experian or Equifax. Part of the lenders review process is to find out how much of a risk you are based on your credit history. Don't worry if it doesn't look that great, there are lots of things you can do to help. For example, ensuring you are on the electoral role and closing down credit accounts that you no longer use.

2. Thinking of changing jobs? Don't.

Most lenders will want to see that you’ve been with your employer for a decent length of time before they’ll give you a mortgage, so if you’re thinking of changing jobs, it’s a good idea to wait until you’ve got your mortgage in place. Usually, it’s a good idea to have been in your existing job for at least three to six months before applying.

3. Reduce your debts

Before you apply for a mortgage, try to reduce any debts you have as this will help demonstrate that you manage your money responsibly, and will mean any mortgage application you make is more likely to succeed. It will also mean you will potentially be able to borrow more when it comes to a lender’s affordability calculations.

4. Save a decent deposit

The more you can save up to put down as a deposit, the bigger the choice of mortgages that will be available to you. Lenders reserve their best rates for those with larger deposits, so you’ll also benefit from lower monthly payments because you’ll have qualified for a better deal.

5. Get the information right on your application

Once you’ve started your mortgage application, don’t start changing figures as it could hold up your property purchase. For every material change made to the application it will need to be reassessed to ensure that it still falls within the lenders criteria. This may not be a major problem, but would probably delay a potential offer.


If you’re struggling to find the right mortgage deal, or you don’t know what you’d be eligible for or how much you can borrow, we can help. We can research the whole of the market for you and help you through the application process. An initial consultation is free of charge.



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Pensions - Have you updated your Expression of Wish?

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When you take out a pension scheme you will have completed an expression of wish, this form denotes your wishes to the pension scheme administrator regarding your beneficiaries and nominees.

With the changes to the pension rules it is now more important than ever to ensure that your expression of wish is up-to-date, otherwise there could be confusion over who the beneficiaries should be. This is because families are increasingly challenging decisions made by pension scheme trustees following the death of a member.

It falls to trustees of the scheme to make such decisions, and although they are not bound by your wishes, the expression of wish allows you to name the people that you would like them to consider when exercising discretion over who benefits should be paid to. Therefore, it is important to name everyone that you would wish to benefit on your expression of wish, in order to ensure that they receive consideration. In fact, the naming of the beneficiary far outweighs the percentage of benefit that you put down for each beneficiary or nominee, the amount of benefit can be changed, but if an individual is not on the expression of wish it is possible that they may not receive anything at all. Similarly, if you want to exclude someone from receiving death benefits, you will need to give very explicit reasons why and reinforce your wishes with a will.

In many cases, people fill in their expression of wish form when they first join a pension scheme and never update it to reflect changes to their circumstances. It is therefore advisable to revisit your expression of wish annually and ensure that it is up-to-date, you can usually do this by completing a new form from your pension provider which will replace your current expression of wish.

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UK Autumn Statement 2016

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We weren’t expecting too many financial planning surprises in the Autumn Statement and the biggest news was the Chancellor's decision to abolish the Autumn Statement. Following the spring 2017 Budget and Finance Bill, the actual Budget will be delivered annually in the autumn, with Royal Assent taking place before the tax year begins. We have summarised some highlights of the budget below after a summary of the UK's economic performance to date as set out in the budget itself.  The full 2016 budget policy paper is available on the gov.uk website.

Summary of economic performance to date

Since 2010, the government has made huge progress in turning the economy around following the Great Recession. The employment rate is at a record high and the deficit has fallen by almost two thirds. But more needs to be done. The deficit remains too high and productivity too low. In addition, the government wants to see more people sharing in the UK’s prosperity and ensure that the tax system is one where everyone plays by the same rules.

In the near term, the UK’s economic outlook has become more uncertain. The British people’s decision to leave the EU presents new opportunities, but also new challenges. The Autumn Statement sets out policies which support the economy during this transition. Alongside the forthcoming Industrial Strategy it prioritises investment to improve productivity and ultimately living standards. It provides certainty for business to secure investment and create jobs; and reprioritises spending to build an economy that works for everyone.

Personal Tax

Personal Allowance - The tax-free personal allowance is being increased to £11,500 in 2017-18. For higher rate taxpayers, the Government will also increase the threshold above which higher earners start paying 40% tax. It will increase to £45,000 in 2017-18. The Government has said that it is committed to raising the tax allowance to £12,500 or £50,000 for higher rate tax payers by the end of this parliament, once it has reached that goal then the personal allowance will increase in line with inflation.

Salary Sacrifice - The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017. There are a few exceptions to this rule: arrangements relating to: pensions, childcare, cycle to work and ultra low emission cars. The result of these changes mean employees swapping salary for benefits will pay the same tax as those who pay for them out of post-tax income. Existing arrangements are protected until April 2018 with arrangements for cars, accommodation and school fees protected until April 2021.

National Insurance – The National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, resulting in some additional cost to employers. Class 2 NICs will be abolished from April 2018. Thereafter, the self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs.

Pensions and Savings

ISAs and Bonds - The annual ISA limit is being increased to £20,000 with effect from 6 April 2017, while the NS&I will offer a new 3 year Investment Bond with an indicative rate of 2.2% from spring 2017. Savings of between £100 and £3000 can be made to savers aged 16 or over.

Starting rate for savings – The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.

Foreign pensions - The tax treatment of pension income and lump sums arising from a foreign pension scheme will be brought into line with the treatment of some payments from a UK registered pension scheme.

Pension scams - The Government will publish a consultation shortly on options to tackle pension scams, including banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers, and making it harder for scammers to abuse ‘small self-administered scheme (SSAS) arrangements.

Corporation Tax

Business Tax Road Map - The new Chancellor confirmed his commitment to the business tax road map set out by George Osborne. This includes cutting the rate of corporation tax to 17% by 2020.

Non-resident companies to enter UK Tax Regime - The Government announced its plans to bring all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the Government will consult on the case and options for implementing this change.

Tax Administration

Tax Avoidance - A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. The penalty is intended to ensure that those who help people tax avoiders whose tax avoidance schemes are defeated by HMRC also face the consequences.

VAT Flat Rate Scheme - A new 16.5% rate is to be introduced from 1 April 2017 for businesses with limited costs, such as many labour-only businesses, to ensure that the scheme is used only as intended.

Requirement to register offshore structures – The Government will consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.

 

 

References

1. Old Mutual Wealth Autumn Statement 2016 Analysis

2. OneE Group Ltd Autumn Statement 2016 Analysis

3. Gov.uk Policy Paper: https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016

 

 

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