News Updates - December
19th December 2018
The Bank of England has warned a no deal disorderly Brexit would send the pound plunging while inflation soars and interest rates rise. The apocalyptic outcome, contained in the Bank's analysis of various EU withdrawal scenarios, would also see unemployment skyrocket. In the event of a disorderly no deal, no transition Brexit, Britain's GDP could fall by 8%, according to a worst case scenario analysis by the Bank. It added the unemployment rate would rise 7.5%, inflation would surge 6.5% while interest rates would rise as high as 5.5%. However, it’s not all doom and gloom. The Bank concluded major British banks have levels of capital and liquidity to withstand even a severe economic shock that could be associated with a disorderly Brexit. Furthermore Mark Carney said there was only a low probability of a worst-case Brexit scenario happening.
Stock markets: what's in store for 2019?
Global stock markets continued to drop sharply on Thursday as the geopolitical fears gripping investors persisted. Having started the week in a buoyant mood, investors have lost all confidence in the long-term effectiveness of the agreement struck between Presidents Trump and Xi at the G20 and have been further shaken by news that Huawei's Chief Financial Officer, Sabrina Meng Wanzhou, was detained by Canadian authorities at the request of the US government. At a time when markets are ultra-sensitive to any trade-related news, risk assets have taken a beating. As a result, the FTSE 100 index plunged to two-year lows - down by 173 points to 6,749 - a drop of 2.5%. The Footsie has not traded at that level since November 2016, and it is now back well below the 6,930 mark which it first attained as long ago as December 1999. We are currently in the longest bull run in history, but all good things must come to an end. That doesn't mean we're going to see a stock market crash or recession next year, but investors need to start preparing for the worst to make sure their portfolios are adequately protected.
Retirement Interest Only Mortgages
Around three million homeowners expect to still be paying back their home loans into retirement and lenders are responding by launching increasing numbers of mortgages for older borrowers. One in five (21% of) mortgage holders – which works out at around three million people – worry that they’ll still be paying their mortgage off into retirement. Over half (58%) don’t know how they’ll keep up their repayments when they’re no longer working, and 53% of that group are already aged over 55, meaning time is running out to make a plan. The ageing population coupled with many people having to wait longer to buy their first home has prompted some lenders to innovate. This new type of deal is designed for retirees who may struggle to get approved for a repayment mortgage because of their age and reduced income. As the name suggests, you just pay back the interest (and none of the capital) each month; the loan itself is only paid back once the mortgage ends. In this regard, RIOs are just like regular interest-only mortgages. However, most retirement interest-only mortgages come with indefinite terms, meaning they only need to be paid back when you die or go into long-term care and the house is sold.
Women's state pension age increases under review
A high court judge has granted a judicial review to determine whether recent increases to women’s state pension age were lawful. The case was brought by BackTo60, a campaign group representing women born in the 1950s who have borne the brunt of recent of increases to the state pension age. Until 2010, women received their state pension at age 60. However, this has gradually been increasing and currently state pension age is 65 for both men and women and will increase to 67 by 2028. State pension ages rose faster for women, in order for them to be equalised with men’s. BackTo60 and other campaign groups, notably WASPI (Women Against State Pension Increases) argue that many women born in the 1950s were not warned of the changes and have suffered financial hardship as a result. BackTo60 is campaigning for all women born during the 1950s to have their financial position restored to the position it would have been, had the state pension age remained at 60.