Mortgage brokers are trying to persuade lenders to offer ‘divorce mortgage’s for couples splitting up in their fifties, says the Telegraph. The over-50s account for the fastest increase in UK divorces and over a quarter of them have to sell their properties when they split up (Independent Financial Advisor Bristol).
Usually they have equity in their homes but neither partner can afford to buy the other out. Moreover, under current ‘affordability’ rules, most lenders will not lend them the amount they need to do so. The plan is for ‘divorce mortgages’ to have a relatively short term, giving the ‘stay in home’ partner time to accumulate the cash or to decide to sell and move on, say when children change schools.
Profiting from a change of tune
The composer Handel, best known for the Hallelujah chorus and the Water Music, made a fortune from his investments despite losing a packet in the South Sea Bubble, says the Telegraph. Unlike Sir Isaac Newton, who lost all his money in the Bubble, Handel shrewdly sold out his shareholding the year before the crash in 1720, and after that stuck to investing in fixed interest bonds, mostly those guaranteed by the British government. By his death in 1759 he held £14,000 worth, the equivalent of about £2 million in today’s money. Handel was wise to learn from the failure of the South Sea Company, says the Telegraph, and stick to safer investments.
House prices keep on booming
House prices rose by more in March 2016 than in any month since the financial crisis, says the Mail, citing Office for National Statistics numbers showing the average UK home now to be worth £292,000, a rise of £8,000 from the previous month. Prices in London and the South East rose fastest with annual rates of over 12%. Experts said landlords rushing to complete purchases before a rise in Stamp Duty rates were largely responsible.
Beats me, guv
The chief economist of the Bank of England admitted that he couldn’t make any sense of pensions, prompting the Mail and many other newspapers to question how we got into this mess. But he pointed to the fact that over time, the risk of pensions has been shifted from employers to individuals and that this is a major issue that has not been properly addressed.
Whats a pension’s worth
The State pension is worth a staggeringly large amount of money, says the Mail. To buy a lifetime income equal to the new flat-rate State pension in the open market would cost between £240,000 and £260,000. The cost is so high because of rising life expectancy, low interest rates and the fact that the state pension is inflation-proof. Research shows the average private pension pot for people in work is about £49,000, so that if – as many people do – you want an income of double the state pension in retirement, you will need at least £250,000 in your pension fund and may well need to save more to accumulate it.
Happy times for first-time buyers
It may be hard getting the deposit together as a first-time buyer, but if you’ve got it, now is a good time to be seeking a mortgage, says the Sunday Times. There’s fierce competition between lenders and many are relaxing some of the criteria they used to apply to self-employed people and contractors without secure employment. Some of the ‘affordability’ rules are also being relaxed for residential buyers, but at the same time lenders are tightening them for buy-to-let purchasers.
Confusion over tax-free interest
The introduction of the Personal Savings Allowance has thrown up anomalies in the treatment of payments by banks and building societies, says the Sunday Times. From April, individuals have an allowance of £1,000 (£500 if they are higher rate taxpayers) of interest they can receive without paying any income tax on it. From April, too, banks stopped deducting tax at source from interest payments. But people are discovering that many payments by banks don’t count as interest, so tax is still being deducted from them. This applies to Halifax’s payments on its Reward account, and similar payments from other banks.
Higher and higher
The number of people paying higher rate income tax in the UK has topped 5 million, says the Financial Times. Analysis of data from HMRC shows that 23 million people in the UK pay no income tax; just over 30 million do pay tax, and a sixth of them pay higher rate tax. The top 10% of earners (with personal incomes over £54,300) receive a third of total income but pay three-fifths of all income tax. This trend to a smaller number of people paying a larger share of the total tax bill has been going on for some time. And there is also marked trend in older people paying more tax: in 2010-11 4.9 million people aged over 65 were taxpayers, but by 2015-16 their number had risen to 5.9 million.
Property funds lower prices
Funds open to individual investors investing in commercial property have cut their prices to deter sellers, says the Financial Times. Most of the large funds have switched from an ‘offer’ to a ‘bid’ basis of valuation, meaning that they deduct the costs of selling property from the price they pay investors who are selling. As yet, the funds are not actually selling property since all have cash piles running into hundreds of millions that they use as a ‘liquidity cushion’, nor is the value of property falling, but fund managers say they are obliged to balance the interests of incoming and outgoing investors, and if cash is flowing out of the funds, investors who sell would get more than their fair share unless the funds are priced on a bid basis.
Easier travel claims ahead
Changes to insurance law that will take place in August are good news for policyholders, says the Financial Times. It is the biggest update in UK insurance law for over 100 years and will clarify what information policyholders have to provide to insurers, as well as removing many grounds for non-payment. It’s estimated that 45% of all large business insurance claims are disputed and that in 60% of those, policyholders get less of their claim paid than they expect. Holders of travel insurance policies, too, are expected to benefit from a reduction in disputed claims.
Dodgy lenders rejected
The National Association of Commercial Finance Brokers claims many small business lenders are as bad as payday lenders, says the Telegraph, charging extortionate interest rates to businesses that can’t get money from their banks. The trade body says it has rejected applications from dozens of dodgy lenders over the past year.
(FTadviser, May, 2016)
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About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.