Your finances post Brexit – a guide

There’s probably not a day that goes by at the moment where you don’t hear the word Brexit. And as we get ever closer to 29th March 2019, the date where the UK is scheduled to leave the EU, this is only set to ramp up.

It’s a time of uncertainty for many and with so much noise in the media, it’s hard to really know what the exact implications us leaving the EU (with or without a deal) will have on our lives and what we need to do to prepare. With this in mind, we’ve been considering which parts of our finances it could impact on if a deal isn’t reached and how to get prepared for life post-Brexit…

Mortgages

The majority of homeowners in the UK will have mortgages with UK-based lenders, so even if there’s no deal, you shouldn’t see any changes straightaway. It’s if there’s any knock-on effects from Brexit on the price of mortgages in the future when we could see things change. Whilst we can’t be completely certain about what will happen with rates post-Brexit, if you’re nearing the end of a fixed-rate mortgage deal and need to remortgage, it may be an idea to act sooner rather than later. Rates are at a very low level currently, meaning you could nab yourself a cheaper deal. Also, considering a fixed-rate mortgage may be your best move if you want to be able to have set repayments that you can budget around for a fixed amount of time.

One thing to be aware of and to look out for post-Brexit is that if companies do struggle to trade in the way they do now because of new restrictions, this could put pressure on UK lenders’ funding. In order to be able to lend out mortgages, banks and building societies borrow money in a variety of ways, including getting funding from the Bank of England and borrowing money from each other on what’s known as ‘money markets.’ The cost of doing this depends on a few factors, but possibly the most important is how much money there is to be borrowed. If companies can’t trade in the same way as they have done pre-Brexit, it could have implications on the pool of money that’s available to UK banks to lend out, which in turn means the cost of money will have to go up. And it’s in this situation that banks and building societies may be forced to put their rates up.

For first-time buyers, some experts have predicted that Brexit could be beneficial.1 That’s because it’s thought in the short-term, house prices could drop and as mortgage rates are already low, it could be a good time to get onto the property ladder. However, remember to not do anything too hasty and always discuss your options with a mortgage adviser first.

Credit cards and loans

Like we touched on in the above section about mortgages, there’s a possibility we may see a knock-on rise in rates offered on credit, such as credit cards and loans, if the cost of money goes up due to companies not being able to trade in the same way as they did before Brexit. However, if you already have a personal loan, the rates for these are normally already fixed from the start, so you wouldn’t need to worry about anything changing.

If you’ve been considering getting a loan for a particular project you have coming up and are able to afford to do so, then it may be wise to take a look sooner rather than later. Whilst we can’t guarantee that rates won’t get cheaper post- Brexit, currently rates for loans above £3,000 are some of the lowest ever seen, so if you need to borrow then it may be best to sort this now.

Experts say that credit card rates don’t tend to be that closely linked to interest rates, so it’s thought that these would largely be unaffected if the cost of money did go up post-Brexit.1

Savings

Like mortgages, if your savings are held in a UK bank or building society, it’s unlikely that you’ll see things change straightaway. It’s if you have any savings held with providers who are based in Europe and not in the UK that you’d need to keep a close eye on things.

In terms of interest rates, it’s been predicted that these could rise post-Brexit if the pound drops. That’s because if we do see a drop, this will push up inflation and the usual way to try and sort this is by increasing interest rates to control demand, so prices will fall. If the pound doesn’t drop, however, and the economy is actually boosted post-Brexit, then the opposite could happen, so nothing’s set in stone just yet.

There shouldn’t be any rush to lock in your savings into a fixed-rate at the moment. Also, if your savings are held in the UK, up to £85,000 per person will continue to be protected by the Financial Services Compensation Scheme, which will provide a safety net for your funds should firms go bust.

Spending money abroad

This one very much depends on whether we enter Brexit with or without a deal. If there’s no deal, then it may be more expensive to use your credit or debit cards in Europe because of a complicated payment system that sits behind us spending on plastic abroad.2 Currently, this is regulated by various laws in Europe, but if we were to leave without a deal in place these won’t apply. 2 So this is definitely something to look out for over the next couple of months, particularly if you do a lot of travelling for work or leisure.

If you’re nervous about post-Brexit changes and you’ve got a holiday planned for the summer and know you’ll need some Euros, then it may be worth getting the money changed over now. That’s because if the value of the pound does drop post-Brexit, the exchange rate won’t be great, so that could impact on the amount of Euros you get to the pound. On the other hand, the pound could strengthen, so again nothing’s set in stone. If you’re in two minds, maybe get some money changed now and then wait till nearer your holiday to change the rest, as unfortunately we can’t say for certain what will happen.

Energy costs

According to Energy UK, the UK’s trade association for the energy industry, it’s thought that our exit from the EU could lead to higher energy bills. This is due in part to uncertainty around whether Britain will be able to remain in Europe’s carbon trading scheme, the EU Emission Trading System (EU ETS), after Brexit.

Currently about 5% of the UK’s electricity and 12% of its gas is imported from the EU and if we do cut ties with the EU ETS, then (although not guaranteed) energy costs could go up.

If you’re contemplating changing energy providers, it may be worth looking for a new 12 month fixed-rate deal prior to March, which will mean your payments are fixed at a set rate for a year and won’t be affected should costs go up during that time. Or another option is to look for a longer-term fixed deal, which could mean your costs are fixed for a longer period.

Preparing for life post-Brexit

We hope you have found this guide useful and it’s helped you feel more prepared for life post-Brexit. If you’re planning on making a big financial decision in the next few months, then your approach should be the same whether Brexit was happening or not. Make sure you do plenty of research and don’t rush into anything you’re not comfortable with or you can’t afford. And if you’re in any doubt, then it’s always best to get some professional financial advice before committing to anything.

1 Taken from https://www.moneysavingexpert.com/family/brexit-what-it-means-for-you/

2 Info taken from https://www.thisismoney.co.uk/money/howmoneyworks/article-6091005/What-no-deal-Brexit-plan-mean-personal-finances.html