May 18, 2022

Spotlight: How Are People In Britain Saving?

Nick Saving Money, Investing infographic 4 Comments

HSBC Bank (in association with pollsters YouGov) recently conducted a survey on saving in Britain. This looked at people’s savings habits and came up with some eye-opening results. I have summarized the main findings below, with graphics where relevant.

What Are the Most Popular Savings Options?

Unsurprisingly, the survey found that cash was Britain’s most popular saving option, with 53% of people saving this way. Other methods are also popular, however, as the graphic below shows.

The survey also found noticeable regional differences in savings habits. London appears to lead the way on cryptocurrency, with 6% of residents saving this way. People in the East of England are the most likely to invest in shares (23%), Scotland sees the most people investing in a pension (35%), and Wales has the highest proportion of investors in gold (4%) and antiques (4%).

Couples living together top the table for people trying to save (60%), ahead of those who have never married (57%) and those who are married or in civil partnerships (55%).

The survey data also suggests a gender divide, with men more likely than women (57% vs 53%) to say they are actively saving in general. Men are also more likely than women to be saving into a pension (35% vs 26%) and are nearly twice as likely to invest in shares (21% vs 12%). This is summed up in the graphic below.

Only just over half (55%) of the population say they are actively saving for the future, but the survey found younger age groups were more likely to be putting cash aside, with 62% of 18-34 year-olds saying they were regularly saving, compared with 55% of those aged 45-54.

And while there’s only a small difference between men and women when it comes to putting money away in cash (54% vs 52%), the data does suggest a wider divide when it comes to other types of investments. As mentioned above, more men than women (35% vs 26%) say they are saving into a pension. Men are also nearly twice as likely to invest in shares (21% vs 12%) and investment funds (12% vs 6%) – while six times more men than women say they have bought into cryptocurrencies.

My Thoughts

As a money blogger, it was interesting for me to see this snapshot of how people in Britain currently save for the future.

One thing that struck me was the relatively small number of people – and women especially – who invest in stocks and shares. Although this can be riskier in the short term, if you are saving for the medium- to long-term, history shows that you are likely to get better results investing in equities (probably via a collective vehicle such as a tracker or investment fund) rather than cash.

Right now, the best interest rate you can get on cash savings is about 1.5%. With inflation in the UK currently up to an eye-watering 9%, this means money kept in a savings account will be losing value in real terms.

Of course, we all need cash savings to fall back on when the unexpected happens (a popular rule of thumb here is three to six months’ worth of expenditure). And there may also be particular things you are saving up for, e.g. a deposit on a house. In that case, you may prefer to save into a cash account, so your money is protected under the Financial Services Compensation Scheme and readily available when the time comes.

But if you are saving for the (indefinite) future and/or retirement, over a period of years investing is very likely to produce better returns for you. To give you an example from my own experience, regular readers will know I have (currently) around £23,500 in the robo-investment platform Nutmeg. Since the start of this year, with the war in Ukraine and inflation fears, the value of my Nutmeg portfolio has fallen by 7.5%. In the six years I have been investing with Nutmeg, however, my portfolio has grown by 60% (time-weighted). Clearly in the last six years I wouldn’t have made anything like that if my money had been in a cash savings account.

Obviously with investing you have to expect ups and downs, which is why you should only invest on a medium- to long-term basis. But over a period of years, investments have almost always out-performed cash savings, often by a considerable margin.

So I do believe everyone should educate themselves about investing and perhaps take professional advice about it too. I would also like to see more taught about investing in schools. And if you have children (or grandchildren), I recommend introducing them to investing from an early age. A Junior ISA can be one very good way of doing this 🙂

One other observation is that the HSBC/YouGov survey makes no mention of crowdlending/peer-to-peer (P2P) saving/investing. This has admittedly lost some of its sheen in recent years, with projects failing and several platforms collapsing. Some people – me included – have lost money with this. However, I do still believe in the potential of investing this way, as long as you are sensible and diversify as much as possible to spread the risk.

Again, regular readers will know that I have modest amounts invested with the property crowdlending platform Kuflink and crowdfunding platform Assetz Exchange. Both of these have been doing well for me and generating returns of 6% or more. I also have a small amount in the European business crowdlending platform Nibble. Clearly this type of investment is riskier than bank savings, as your money is not protected by the FSCS. But returns can be significantly higher, and unlike equity-based investments they are not directly affected by the ups and downs of the stock markets. The latter can be reassuring when markets are volatile, as at present.

Finally, in case anyone is wondering, I am not a fan of cryptocurrencies and don’t therefore invest in them myself or write about them on PAS. As this recent article indicates, while you can certainly make money with crypto if you’re lucky, it’s also very possible to lose your shirt!

Thank you to my friends at HSBC for allowing me to use their survey results and infographics. They also have some tips here on how to save money and stick to your savings goals.

As ever, if you have any comments about this post and/or any of the survey findings mentioned above, please do share them in the comments as usual.

Disclaimer: I am not a qualified financial adviser and nothing in this post should be construed as individual financial advice. You should always do your own ‘due dligence’ before investing, and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

If you enjoyed this post, please link to it on your own blog or social media:

May 12, 2022

Could You Be a Holiday Let Landlord?

Nick Making Money, Investing 3 Comments

Tourism in many parts of the UK is booming right now.

As we come out of the pandemic some people are venturing abroad again. But many others (perhaps deterred by the remaining restrictions and long queues and cancellations at airports) have been discovering (or rediscovering) what this country has to offer. This in turn has led to a growing demand for holiday rentals. That is only likely to increase as overseas visitors start to return as well.

There is undoubtedly money to be made from holiday lets, so in my post today I shall be looking at this subject in more detail. The article is written in association with my friends at the Suffolk Building Society and I shall be quoting from their detailed research on this subject (and using some of their graphics!).

Let’s start with the most crucial consideration for would-be holiday let landlords…

Table of Contents

Setting

A recent study by the Suffolk Building Society found that the setting of a property was more important for potential landlords than other factors such as renovation potential or proximity to amenities. The key aspects for would-be landlords when considering buying a holiday let were:

A property that is in or near beautiful scenery (31%)
A property that is near the beach or coast (30%)
A property that is easy to manage and doesn’t require much upkeep (28%)
A property that is in an area that the landlord already personally knows or loves (27%)
A property that is in a popular tourist or holiday destination (23%)

This is summed up in the graphic below.

Location

As you can see in the graphic below, Devon and Cornwall were the locations most aspiring holiday let landlords were considering, followed by the Lake District, Peak District and Yorkshire Dales.

How Much Can You Make?

Being a holiday let landlord has many attractions, including significantly higher returns than are achievable from residential lets.

An apartment in a popular tourist area, for example, can generate £1,000 a week or more (in peak season at least). A recent report in Which? found that the average annual yield on a holiday let was just over 10%. This compares favourably with residential buy-to-lets, where around 7% a year is more typical. The Which? article mentioned above forecasts holiday let yields rising in future to 14% or more.

According to Sykes Holiday Cottages, the average holiday let owner is earning approximately £21,000 per year. You can also enjoy cheap holidays staying at the property yourself. And there are tax advantages too, as running a furnished holiday let (FHL) is considered a trade rather than an investment. This means you can offset mortgage interest costs against your income, as well as council tax and other bills.

On the downside, being a holiday let landlord is likely to be more hands-on. New tenants will move in every few days and the property will need to be cleaned, tidied and restocked on a regular basis. Covid precautions have added an extra dimension to this (though rules are now easing). There will be more admin dealing with a steady stream of enquiries and visitors. You will need to budget for advertising too, or risk ‘voids’ when your property is empty and you are losing rather than making money. And finally, any garden at the property will need tending as well.

You can of course outsource some (or all) of this work to a management agency, but naturally there will be a cost to this, impacting your bottom line

Tips for Would-be Holiday Let Landlords

If you are planning to buy a holiday let property with a mortgage (as most people do), there are some important things to bear in mind. Buying a holiday let differs in some significant ways from buying a home to live in or even a traditional buy-to-let.

Be aware that many holiday let mortgages require a landlord to have a mortgage, own their main residential property first, or have buy-to-let properties already – and in some instances, a combination of these.
Understand that some lenders also have age restrictions for first time landlords, even if they are already residential home owners.
Affordability assessments for holiday-let properties are usually calculated on the property’s rental potential rather than personal income and outgoings, but the lender will still want to understand the applicant’s financial position.
Applicants may have to demonstrate a minimum income set by the lender, but this income can often be from a combination of employment, self-employment, investments, pensions, and so on.
Be prepared to show third-party evidence of rental value in low, mid and high seasons from a verified lettings agent – even if not planning on using an agency to manage the property.
Expect that the property will also be assessed by the mortgage lender. Properties in holiday parks, caravans or lodges, and those of unusual construction method may not always be accepted.
Applicants should not assume they can market their property on short-term lettings sites such as Airbnb and Vrbo – some mortgage lenders have rules that prohibit this.
Check the amount of personal use allowed so as not to breach terms and conditions. Mortgage companies will always allow the owner a certain amount of personal use but this can vary.
Check whether the mortgage lender has a limit on the number of holiday let and/or buy to let properties that the landlord is allowed to own.
Specialist holiday letting insurance must be arranged with public liability cover (typically minimum £1 million) included.

Suffolk Building Society’s Head of Mortgages, Charlotte Grimshaw, says: ‘Before jumping on the [holiday let] bandwagon, potential owners should do their due diligence; consider the financial commitments of not just the purchase but the maintenance, taxes, and other expenses such as cleaners and gardeners. It’s also worth taking the time to understand the market, and check out the competition before falling in love with a property that isn’t viable in terms of lettings.’

And she adds: ‘Applying for a holiday let mortgage can be a little more complex than applying for a traditional residential property or buy to let, so it can be helpful to approach an independent mortgage adviser to ensure the application has the best chance of success. A mortgage adviser will also have a good understanding of the different criteria that mortgage companies request, helping landlords find the most suitable product.’

Final Thoughts

Thank you again to my friends at Suffolk Building Society for their help with this article. I hope it has opened your eyes to the money-making potential of holiday lets. And if you are among the 17% of UK adults who (according to the SBS survey) considered buying a holiday let property during the pandemic, I hope it has given you some points to think about.

SBS offer holiday let mortgages themselves (along with standard buy-to-let and other mortgages). You can read more about their holiday let mortgages here.

You might also enjoy reading my blog post Can You Still Make Money From Buy to Let? although this is more about letting residential property.

As always, if you have any comments or questions about this post, please do leave them below.

If you enjoyed this post, please link to it on your own blog or social media:

May 6, 2022

Nibble Review – European Crowdlending Investment Platform Open To Everyone

Nick Making Money, Investing crowdfunding 7 Comments

UPDATED 27 May 2022

Regular readers of PAS will know I have a particular interest in P2P/crowdlending investment. Such platforms offer the opportunity to invest in loans to businesses or individuals and profit from the interest charged to borrowers.

With savings account interest rates still very low, many investors are understandably looking for better returns on their savings and investments. If that applies to you, European crowdlending platform Nibble is worth a look.

Table of Contents

What is Nibble?

Nibble is a crowdlending platform launched in 2020 by IT Smart Finance, a company with over five years’ experience developing innovative products in financial technology.

Nibble’s business method involves investing in P2P loans to businesses made through Joymoney (the flagship product of the ITSF group). Private investors can then invest in these loans to take advantage of the interest paid by borrowers.

What Are the Benefits?

Probably the biggest attraction of Nibble to investors is that it offers returns on investment of up to 14.5%. As you will doubtless know, this is well above the average in the collective financing industry.

The minimum investment with Nibble is just €10 (about £8.40 at current exchange rates). The platform has an auto-investment tool, allowing trading to be fast and straightforward. You aren’t required to choose individual loan investments, as this is handled by the company. You simply choose one of three investment strategies (see below) based on the timescale over which you wish to invest and the level of risk you are comfortable with.

Other attractions include a minimum investment period of as little as one month, with interest credited to your account weekly. You can withdraw the interest if you wish or reinvest it in an existing or new portfolio.

In addition, if you want to withdraw money from your account early, Nibble say they will find a new investor for your portfolio for a small commission fee.

What Are the Risks?

Obviously no investment is without risk, but Nibble have gone to some lengths to keep this as low as possible. You can read a detailed article about this on this page of the Nibble website (warning: it is quite long!).

For investors opting for the lowest-risk Classic Strategy (see below) a Buyback Guarantee applies. That means that if a borrower defaults on payment, the company will return your money, including interest earned, for the time you held the loan.

For the other two, higher-paying strategies, the risk is shared between the investor and the platform in the form of a variable interest rate. The rate paid is decided by the Risk Committee, which meets monthly to assess how loan portfolios are performing and set rates accordingly. The actual rates paid therefore vary from month to month.

Obviously the other risk is that the lending company itself will go bust. For various reasons set out on the Nibble website this appears unlikely, but of course it is not impossible. If that were to happen, you would not be covered by the Financial Services Compensation Scheme (FSCS) which covers deposits in registered UK savings institutions up to £85,000. Nibble say that in the worst case scenario ‘a management company will be assigned to help the investor to recover funds in accordance with the rights of claim against the borrower. In addition, there is always a reserve fund which serves as an additional “safety airbag” for the investor.’

Finally, as loans are currently all in euro, UK investors will of course have to contend with exchange rate fluctuations, which could work for or against you.

How Do You Get Started?

If you wish to invest via Nibble, the first thing you will need to do is set up an account via the Nibble website.

As Nibble is a European operation, you will need to invest in euro and your returns will be paid in this currency. That obviously adds a layer of extra complexity for UK citizens, but there are various ways round this. If you have a UK bank account you will normally be able to make (and receive) payments in euro, but may be charged a NSTF (Non-Sterling Transaction Fee).

You could use your own bank to fund your account initially, but if you become a regular investor with Nibble you might want to use a service or account that charges lower fees. You could use a money transfer service such as Paysera or Wise (formally TransferWise). These will enable you to transfer funds between Nibble and your own bank account with lower charges (and potentially a more favourable exchange rate). Another option would be to open a Euro account with a provider such as Starling. This will allow you to receive and make payments in both sterling and euro, again at a lower overall cost.

Nibble offers investors a choice of three investment strategies according to income and risk preferences. They call this approach Flexible Investment. The three strategies are called Classic, Balanced and Legal. They differ in the level of income on offer, the degree of risk, and how those risks are distributed between the platform and the user. Each strategy is described below using screen captures from the Nibble website.

Classic Strategy

As you can see, this strategy offers the lowest level of risk and also the lowest rate of return (though still a respectable 8% at time of writing and up to 9.7% if you reinvest every time your investment matures). You can start with as little as 10 euro for a minimum period of just one month, so this may be a good way to test the water initially. Be aware that the minimum withdrawal is 50 euro though.

An important thing to note here is the BuyBack Guarantee. As mentioned above, this means that if a borrower defaults on their payment, the company will return your money, including interest earned, for the time you held the loan. That significantly reduces the risk of investing.

Balanced Strategy

As you will see, the Balanced Strategy offers higher potential returns than the Classic Strategy but without the safety net of the Buyback Guarantee. The minimum investment amount is 100 euro and the minimum period seven months. According to Nibble this is the most popular strategy among investors, with almost 2/3 opting for it.

Legal Strategy

The Legal Strategy offers the highest potential returns. The loans in question are in default and facing legal action (hence the name). Nibble buy these loans at a heavily discounted rate and then seek to recover as much as possible of the amount owed. The minimum investment amount is 10 euro and the minimum period is six months.

As you can see, the Legal Strategy comes with a deposit back guarantee. This is a guarantee to return the full investment amount at the end of the investment period and a minimum yield of 9% per annum. The actual yield paid will depend on how successful recovery efforts prove, so you may end up with a return of anywhere between 9% and 14.5%.

According to Nibble 13% of their investors choose this strategy, which is a fairly new one.

My Experience

I wanted to try out Nibble myself,so I set up an account with them. The process was quick and straightforward. You just click on Create Account at the top of the Nibble homepage and follow the online instructions.

You are required to complete a short verification process before opening your account. This involves taking a photo of your passport, driving licence or some other form of ID, along with a selfie. You may use your mobile phone camera for this. It all worked smoothly and seamlessly in my case, and within a couple of minutes my application had been verified and approved.

After that, it is just a matter of making your initial deposit and deciding which of the strategies mentioned above you want to use. I chose the Classic Strategy as a low-risk test and so far everything has gone as promised. Interest is credited to my account every week, and so far at the end of each investment period I have reinvested all the capital and interest received.

I plan to try out the new Legal Strategy myself and will report in due course how this goes.

Closing Thoughts

If you are looking for a more exciting home for some of your cash that allows you to take advantage of the higher interest rates on offer in Spain (and other countries soon), Nibble is worth checking out.

I like the low minimum investment for the Classic Strategy and the fact that the minimum loan period for this is just a month. That allows you to try out the platform without risking too much or tying up your funds for too long. The BuyBack Guarantee provides additional reassurance. The other strategies offer higher rates of interest, though it is important to note the longer investment periods and the fact that rates paid may vary from month to month.

The website’s ease of use is another attraction, as is the fact that Nibble doesn’t impose any fees or charges on investors. As mentioned above, you do just need to bear in mind the need to switch between pounds and euro and the importance of minimizing the costs associated with this.

As a Spanish-based company NIbble doesn’t have too many UK reviews, but those that I have seen are almost entirely positive. On the popular independent Trustpilot website, they get an average score of 4.2 (‘Great’) with 75% of reviewers awarding them a maximum five star rating.

My advice if you want to try Nibble would be to start by investing modestly using the Classic Strategy (as I have). This will allow you to see how the platform works and get your capital returned with interest in as little as 30 days. You can then move on to the other investment options (Balanced and Legal) for bigger potential returns if you wish.

I have just made a small additional investment in the Nibble Legal Strategy, so will be saying more about this soon.

Obviously, nobody should put all their money into Nibble, but it is worth considering within a diversified savings and investments portfolio, especially in the current low-interest savings environment. As stated above, you should also bear in mind that your money won’t be protected by the Financial Services Compensation Scheme (FSCS), which protects deposits of up to £85,000 in most UK bank accounts. Of course, P2P/crowdlending platforms in the UK are not generally covered by the FSCS either.

I will, of course, continue to report on Pounds and Sense how my Nibble investments fare.

As always, if you have any comments or questions about this post, please do leave them below.

Note: This is a fully updated version of my original Nibble review from 2021.

Disclaimer: I am not a qualified independent financial adviser and nothing in this post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and seek professional advice if unsure how best to proceed. All investing carries a risk of loss. Note also that this review includes my affiliate (referral) links, so if you click through and end up investing with Nibble, I may receive a commission for introducing you. This will not affect the price you pay or the product/service you receive.

If you enjoyed this post, please link to it on your own blog or social media:

May 2, 2022

My Investments Update – May 2022

Nick Making Money events, travel 4 Comments

Here is my latest monthly update about my investments. You can read my April 2022 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA. This is the largest investment I hold other than my Bestinvest SIPP (personal pension).

As the screenshot below shows, my main portfolio is currently valued at £20,799. Last month it stood at £21,646, so that is a fall of £847.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,166 compared with £3,286 last month, a fall of £120

Here is a screen capture showing performance over the last month.

Obviously the falls are disappointing (although they come after broadly similar rises the month before). As I’ve noted previously on PAS, you do have to expect ups and downs with equity-based investments, and certainly over the last few months there has been no shortage of volatility in world markets. And it’s also worth noting that since I started investing with Nutmeg in 2016 I have still enjoyed a total return on my main portfolio of 45% (or 64.25% time-weighted).

I should also mention that I selected quite a high risk level for both my Nutmeg accounts (9/10 for the main one and 5/5 for Smart Alpha). This has served me well generally, but I’m sure investors who selected lower risk levels will have seen smaller falls last month.

If you also have a Nutmeg portfolio and plan to withdraw from it in the next few months, there is certainly a case for switching to a lower risk level right now.

You can read my full Nutmeg review here (including a special offer at the end for PAS readers). If you are looking for a home for your annual ISA allowance, based on my experience over the last six years, they are certainly worth considering.

If you haven’t yet seen it, check out also my blog post in which I looked at the performance of Nutmeg fully managed portfolios at every risk level from 1 to 10 (as mentioned, my main port is level 9). I was actually pretty amazed by the difference the risk level you choose makes. If you are investing for the long term (and you almost certainly should be) opting for a hyper-cautious low-risk strategy may not be the smartest thing to do.

I won’t go into detail about my Assetz Exchange investments this month. Briefly, though, regular readers will know that this is a P2P property investment platform focusing on lower-risk properties (e.g. sheltered housing). I put an initial £100 into this in mid-February 2021 and another £400 in April. In June 2021 I added another £500, bringing my total investment up to £1,000. Since I opened my account, my AE portfolio has generated £51.50 in revenue from rental and £82.29 in capital growth, a total of £133.79. That’s a decent rate of return on my £1,000 investment and does illustrate the value of P2P property investment for diversifying your portfolio when equity markets are volatile. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Another property platform I have investments with is Kuflink. They have been doing well recently, with new projects launching almost every day. I currently have over £2,150 invested with them, a significant proportion of which comes from reinvested profits. To date I have never lost any money with Kuflink, although some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question. At present all my Kuflink loans are performing to schedule, with several due to mature in the next few months.

Kuflink recently announced that they were ending their cashback incentive for new members. This used to pay up to £4,000. I know several PAS readers availed themselves of this offer. It’s obviously disappointing it’s now ended, but in a way it’s good news as well. It demonstrates that Kuflink is thriving and they don’t need to offer ‘bribes’ to bring in new investors. As they themselves said in a recent email, ‘We feel now is the right time for us to move away from these campaigns [cashback and refer-a-friend] and utilise the funds within the business to make further enhancements to our products and the platform.’

Even without the cashback incentive, I do still recommend Kuflink and will continue to invest with them. You can read my full Kuflink review here. They offer a variety of investment options, including a tax-free IFISA paying up to 7% interest per year with built-in automatic diversification. Alternatively you can now build your own IFISA, with most loans on the platform being IFISA-eligible.

Another platform in which I have a modest investment is the European crowdlending platform Nibble. This has continued to perform as promised. Several of the loans I invested in have matured and each time I have reinvested the proceeds.

Nibble recently added a new loan category to their offering. This is in the debt collection market; Nibble describe it as their Legal Strategy. This involves investing in loans that are overdue and facing legal action for recovery. Nibble buy these loans at a fraction of their value and then attempt to recover as much of the outstanding debt as possible.

Nibble investors can buy portions of these loans for prices starting at 100 euro (about £84). The company say that investors will receive annual interest rates of between 8 and 14.5% according to how successful their recovery efforts prove. But in any event they offer a ‘buyback guarantee’ that even in the worst case you will receive 8% interest and return of your original investment. I will be trying this out myself soon and also updating my original review, which you can read here if you wish. You can also sign up directly on the Nibble website if you like [affiliate link].

Also this month I wanted to mention that the under-the-radar matched betting opportunity I have described a few times on PAS has closed. My contact there tells me the bookies have tightened up so much on their offers that it is no longer feasible to go on running a free service that makes money for both clients and the company. Final payments went out by the end of April to all existing members (which of course include a number of PAS readers). Again this is obviously disappointing, but I have seen myself that it is getting harder and harder (though not yet impossible) to generate profits from matched betting, especially once you have exhausted the welcome offers.

Anyway, the better news is that the guys behind the business have a new project in the pipeline that will make use of the clever software they developed for the matched betting service. It will work a bit differently from the original programme, but again will be free to join and entirely risk-free for members. They say they expect it to work over a three-month period and generate a one-off payout of between £500 and £1500 per person. In addition, because the new programme will work differently, it will also be open to people who do matched betting themselves (or have done in the past). I will share more details on PAS when I have them – but for now if you would like to be put on my priority list for info, just drop me a line with your email address via my Contact Me page.

Another bit of news is that I have temporarily suspended withdrawals from my Bestinvest SIPP, which is now in drawdown. This is partly in response to volatility in world markets caused by the war in Ukraine and inflation fears (among other things). But also I don’t need the money as much at the moment, as I am now receiving the full state pension. With my other income streams as well, continuing to draw an income from my SIPP would have generated a tax liability, so I thought it better to let the money grow tax-free in my pension fund until I really need it. My personal financial adviser Mike agrees and approves, incidentally 🙂

You might also enjoy reading this comprehensive guide to managing your money in retirement by my friends at Companion Stairlifts, in which I am quoted:

Lastly, I enjoyed my short break in lovely Llandudno a week ago. I was reasonably lucky with the weather, although it was quite windy. But it was great to see the resort almost back to normal after the lockdowns and other disruptions of the last two years. There were plenty of people out and about enjoying the spring sunshine, as this photo taken at the end of the pier shows 🙂

One other thing that struck me in Llandudno was how widely cash was accepted and indeed welcomed. In the Midlands town where I live most businesses don’t seem to want cash any more and insist on payment by card. I actually had to go to a cashpoint in Llandudno to draw more money. I can’t remember the last time I did that at home!

That’s enough for now, so I’ll sign off till next time. I hope you are keeping safe and well, and making the most of the better weather and lifting of Covid restrictions. If you’re planning any UK holidays yourself, don’t forget I have a list of places I have visited and recommend here 🙂

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Note also that posts may include affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered.

If you enjoyed this post, please link to it on your own blog or social media:

April 18, 2022

How to Reduce Your Water Bills

Nick Saving Money 4 Comments

With the current cost-of-living crisis, we all need to save money any way we can. So today I’m looking at some ways you may be able to reduce your water bills.

It should be said that water pricing varies across the UK. In England and Wales, unless you have a water meter, the price you pay will depend on the rateable value of your home. In Scotland – again unless you have a meter – you will pay a standard water charge with your council tax. Domestic customers in Northern Ireland are fortunate in that they are not generally required to pay a water bill at all.

Should You Get a Water Meter?

The average water bill for unmetered customers is currently around £400 a year.

If you’re on a low income, that can represent a significant portion of your money. And unlike gas and electricity, you can’t just shop around for a better deal with a different supplier. You may, though, be able to make substantial savings by having a water meter installed.

With a meter, you are of course charged according to the amount of water you use. A rule of thumb here is that if your home has more bedrooms than occupants or the same number, it is worth looking into getting a meter installed.

Of course, people vary considerably in how much water they require. So you can use this free calculator from the Consumer Council for Water to check whether you are likely to save money with a meter. It asks a series of questions about your home and your water usage and shows the estimated cost if you had a meter. You can then compare this with what you ‘re paying currently.

The good news is that in England and Wales (though not Scotland) water companies will normally install a water meter free of charge if requested. Even better, they will usually let you switch back to unmetered within 12 or even 24 months if you find you are paying more than you were before. You should check with your water company to find out their policy about this.

If your water company can’t fit a meter for some reason, you can ask for an ‘assessed charge bill’. This is calculated according to the size of your home and how many people live there. If it comes to more than you’re currently paying you can stick with your present billing method, so there is nothing to lose by asking for this.

Ways to Save Money With A Water Meter

Once you have a meter installed, there are many ways you can reduce your water usage and save yourself money (and benefit the environment too). Here are just a few…

Only ever use the washing machine with a full load.
Have showers rather than baths and keep them short.
Fit a water-efficient ‘low-flow’ showerhead.
Do all the washing-up in one go.
Use a dishwasher, or at least a washing-up bowl.
Turn off the tap while brushing your teeth.
Don’t use the toilet as a waste bin for paper tissues, etc.
Fix dripping taps and other leaks as soon as possible.
Go easy on watering the garden. If possible, collect rain in a water butt and use this.

Finally, most water companies offer gadgets to save water, which they will send you for free. Phone them or check on their website to find out what’s available.

Other Ways to Reduce Your Water Bills

If you’re on a low income, all the water companies have schemes designed to help you. These vary a lot and you will need to check with the company supplying you to find out what they offer.

Severn Trent, for example, has what it calls The Big Difference Scheme. If your household income is below £16,480, you could get up to 90 percent off your bills. You can read more about this here.

I hope this advice will help you reduce your water bills. If you have any additional suggestions – or other comments or questions about this post – please do leave them below.

If you enjoyed this post, please link to it on your own blog or social media:

April 7, 2022

Spotlight: The Bestinvest Investment Platform

Nick Investing reviews 4 Comments

Today I’m looking at Bestinvest, an investment platform I have used myself for many years. My SIPP (Self Invested Personal Pension) is held with them.

Bestinvest was founded in 1986, so it is one of the UK’s longest established platforms. In 2014 they merged with Tilney, and the company rebranded as Tilney Group in 2017.

Bestinvest has around £2.7 billion in assets under management (AUM). This puts it in the mid-size category, some way behind the UK’s three biggest investment platforms, Hargreaves Lansdown, AJ Bell YouInvest and Interactive Investor.

Of course, size isn’t everything. As a well-established platform with competitive fees and a reputation for high-quality customer service, Bestinvest has plenty to offer discerning investors.

Table of Contents

What Does Bestinvest Offer?

Bestinvest offers four main types of account. These are:

General Investment Accounts can be used for investments outside your tax-free allowance (e.g. the £20,000 annual ISA allowance). You can also use this account for day-to-day share trading. But be aware that any income or capital gains generated within this account (above your personal allowance) may be liable for income tax, dividend tax and/or capital gains tax.

Within their accounts, investors can select from a wide range of funds and individual company shares. You can choose from over 2,500 funds, UK shares, ETFs, and investment trusts. There is no access to US shares, though. So if that is something you might require, another platform such as Hargreaves Lansdown or eToro might be a better choice for you.

As someone asked me this, I should maybe clarify that while you can’t buy US shares directly on Bestinvest, you can of course buy funds investing in the US market if you wish. Personally I have some of my SIPP money invested in the HSBC American Index C fund.

What Are The Charges?

Bestinvest recently revamped and in many cases reduced their charges. They are now highly competitive in many areas.

For most accounts there is a tiered platform fee. This begins at 0.4% for the first £250,000, 0.2% for the next £250,000, 0.1% for £500,000 to £1,000,000, and zero over that.

Bestinvest do, however, offer a range of ready-made portfolios, where the fee for the first £250,000 is just 0.2%. This is half the standard rate (and makes them extremely competitive with other platforms). For more information about fees and charges, see the Bestinvest website.

Buying and selling funds on Bestinvest is free (though you will of course still have to pay fund charges). Bestinvest recently slashed their share dealing charge to £4.95 per deal.

Information and Advice

Bestinvest is aimed at people who are comfortable choosing their own investments. They do, though, offer plenty of information and advice for investors, much of it for free.

As mentioned above, they have a range of ready-made portfolios you can choose from. Bestinvest charge half their normal fee for these (0.2% rather than 0.4% for the first £250,000). They comprise a carefully selected collection of investments, so you don’t have to spend time choosing yourself. They have two fund ranges, Expert and Smart. Each has different investment portfolios, from defensive to maximum growth and everything in between. If your focus is sustainability or income, they have funds for those as well.

But if you prefer to choose your own investments, Bestinvest have tools and articles to assist with this too. Their investment search tool lets you search according to a wide range of criteria. You can then access in-depth information on any potential investments that look appealing.

Advice from registered financial advisers is also available via the Bestinvest platform. If you plan to invest over £20,000 in ready-made portfolios, personalized advice about choosing the best option/s for you is available for free. You can also get free ‘coaching’ calls, and more in-depth personal financial advice, for which there is a charge. Again, see the Bestinvest website for more information.

What Are the Pros and Cons of Bestinvest?

PROS

Well-established platform with a large client base
Range of accounts to meet most needs
Well-designed, user-friendly website
No dealing fees when buying or selling funds
Reasonable fees (£4.95) when buying shares
Low minimum investment (just £50 in most cases)
Highly rated UK-based customer service
Information, advice and ready-made portfolios available
Ready-made portfolios are exceptionally good value
User-friendly investment research tools
Bestinvest pay up to £500 towards any exit fees your current providers charge when you transfer your investments to them

CONS

No access to US shares
No mobile app currently
Some users have had issues with the website (though see below)

What Do Users Think?

On the independent TrustPilot website, Bestinvest has an average rating of 3.8 (‘Great’) at the time of writing, with 38% of users awarding them a maximum five stars rating. That is roughly on a par with other leading UK investment platforms.

Positive comments typically emphasize the high-quality customer service and range of advice and information available. Some of the negative comments concern issues with the website, though it is worth noting that this has just been revamped.

Bestinvest has also received various industry awards, including Best Customer Service at the 2021 Shares Awards run by Shares Magazine, and Best ISA Provider in the 2020 COLWMA Awards. You can see a full list of their recent industry awards here.

Closing Thoughts

If you are planning to start investing (or switch from your current platform) Bestinvest is certainly worthy of your consideration. It is a popular, well-established platform with a good range of accounts and services. Their charges are competitive, and (as I can testify from my many years as a client) their UK-based customer service is first rate.

The Bestinvest SIPP is widely considered their flagship product, and as I have one of these myself (now in drawdown) I wouldn’t argue with that. There are no set-up fees, no fund-dealing charges and they pay up to £500 towards your exit fees if transferring from another provider. The Bestinvest SIPP has recently become even more competitive with the scrapping of the £100 (plus VAT) administration fee and certain other charges. Note that there is still a minimum charge of £120 per annum, though.

Bestinvest’s ready-made portfolios are an attractive (and great value) option for novice investors and those who don’t have time to research all their investments themselves. But equally, if you are happy to pick your own funds and shares, Bestinvest has all the information and tools you will need.

While Bestinvest’s share-trading fees are relatively low, if you’re planning to buy and sell individual shares regularly, a low-cost dealing service such as eToro might be better for you. They offer commission-free trading on shares and charge no monthly account fee. That makes them ideal for short-term traders and investors looking to build a portfolio of shares cheaply. Of course, this is a riskier approach to investing, and not recommended for those new to the field.

As ever, if you have any comments or questions about this blog post or Bestinvest in particular, please do leave them below.

Note also that this post includes affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered.

If you enjoyed this post, please link to it on your own blog or social media:

April 1, 2022

My Investments Update April 2022

Nick Investing 4 Comments

Here is my latest monthly update about my investments. You can read my March 2022 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, my main portfolio is currently valued at £21,646. Last month it stood at £20,859, so that is a rise of £787.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This is now worth £3,286 compared with £3,166 last month, a rise of £120

Here is a screen capture showing performance over the last month.

Obviously these rises are good news, and cancel out a good part of the falls since January this year. I hope this trend will continue in the coming months! I don’t know the exact reasons for the recovery in share prices, but I guess some of it may be down to the likelihood of nuclear Armageddon in Ukraine receding a bit. In any event, it does demonstrate the importance to investors of holding your nerve when prices fall and not bailing out at the first sign of trouble. As I often say on Pounds and Sense, investing should always be regarded as a medium- to long-term venture.

As regular readers will know, this year I am using Assetz Exchange for my IFISA. This is a P2P property investment platform that focuses on lower-risk properties (e.g. sheltered housing on long leases). I put an initial £100 into this in mid-February 2021 and another £400 in April. Everything went well, so in June 2021 I added another £500, bringing my total investment on the platform up to £1,000.

Since I opened my account, my Assetz Exchange portfolio has generated £47.60 in revenue from rental and £73.85 in capital growth, a total of £121.45. That’s a decent rate of return on my £1,000 investment and does illustrate the value of P2P property investment for diversifying your portfolio when equity markets are volatile.

At one time Assetz Exchange had a problem with demand from investors outstripping supply, but in recent months an influx of new projects has helped alleviate that. AE also has a sensible policy of limiting the amount any one person can invest in a project for the first few weeks (typically £2,000 to £3,000 maximum), to ensure everyone has a fair chance to participate.

I recently invested some of the rental income I’ve received in another project on AE, a housing association property for people with learning difficulties in Doncaster. I now have investments in 22 different projects and all are performing as expected, generating rental income and – in every case but one – showing a profit on capital. So I am very happy with how this investment has been doing. And it doesn’t hurt that most projects are socially beneficial as well.

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned. You can actually invest from as little as 80p per property if you really want to proceed cautiously.

As mentioned, my investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Another property platform I have investments with is Kuflink. They have been doing well recently, with new projects launching almost every day. I currently have over £2,150 invested with them, quite a large proportion of which comes from reinvested profits. To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, when this happens additional interest is paid for the period in question. At present all my Kuflink loans are performing to schedule, with several due to mature in the next three months. So I will be planning to reinvest with Kuflink as this happens, in projects such as the one below.

My loans with Kuflink pay annual interest rates of 6 to 7.5 percent. As mentioned above, these days I invest no more than around £150 per loan (and often less). That is not because of any issues with Kuflink but more to do with losses of larger amounts on other P2P property platforms in the past. My days of putting four-figure sums into any single property investment are behind me now!

Nowadays I mainly opt to reinvest the monthly repayments I receive from Kuflink, which has the effect of boosting the percentage rate of return on the projects in question

Obviously a possible drawback with Kuflink and similar platforms is that your money is tied up in bricks and mortar, so not as easily accessible as cash savings or even (to some extent) shares. They do, however, have a secondary market on which you can offer any loan part for sale (as long as the loan in question is performing and not in arrears). Clearly that does depend on someone else wanting to buy it, but my experience has been that any loan parts offered are typically snapped up very quickly. So if an urgent need arises, withdrawing your money (or part of it) is unlikely to be an issue.

You can read my full Kuflink review here. They offer a variety of investment options, including a tax-free IFISA paying up to 7% interest per year with built-in automatic diversification. Alternatively you can now build your own IFISA, with most loans on the platform (including the one shown above) being IFISA-eligible.

I’d also draw your attention to Kuflink’s revised and more generous cashback offer for new investors [affiliate link]. They are now paying cashback on new investments from as little as £500 (it used to be £1,000). And if you are looking to invest larger amounts, you can earn up to a maximum of £4,000 in cashback. That is one of the best cashback offers I have seen anywhere (though admittedly you will need to invest £100,000 or more to receive that!).

I also recently published a blog post about another P2P property investment platform called BLEND. Like Kuflink, they offer the opportunity to invest in secured loans to experienced property developers. They offer (on average) somewhat higher rates of return than Kuflink, though arguably with a little more risk. As well as my blog post about BLEND, you can also check out what they have to offer on their website [affiliate link].

Moving on, I have two more articles on the always-excellent Mouthy Money website. The first contains my best tips and advice about cruise holidays. As I say in the article, the cruise industry was hit hard by the pandemic, but it is up and running again now and desperate to lure holidaymakers back. So there are some great deals to be had at the moment!

My other Mouthy Money article is about two state benefits that many older people who would be eligible are currently missing out on. You can read this article here.

That’s plenty for now, so I’ll sign off till next time. I hope you are keeping safe and well, and making the most of the better weather and more relaxed Covid restrictions that now apply (apart from in Scotland). I am looking forward to visiting Llandudno in a few weeks time (and duly grateful the Welsh government has recently eased restrictions there). I also have breaks in Criccieth and Lavenham booked for later in the summer, with more to come. If you’re planning any UK holidays, don’t forget I have a list of places I have visited and recommend here 🙂

Note also that this post includes affiliate links (disclosed). If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered.

If you enjoyed this post, please link to it on your own blog or social media:

March 27, 2022

How to Cut Your Motoring Costs

Nick Saving Money travel, insurance, motoring 4 Comments

Today I’m looking at some ways you may be able to cut the amount you spend on motoring.

Right now, as I’m sure you know, the cost of motoring is rising fast. Fuel prices are obviously a major issue, with the war in Ukraine and economic sanctions on Russia driving up prices that were already increasing anyway.

But in addition, drivers are having to contend with ever-rising road taxes, congestion charges, insurance premiums, repair and servicing bills, and more. And while these costs keep going up, many of us are also having our incomes squeezed.

So today I thought I would share some tips and ideas for cutting your motoring costs…

Table of Contents

Travel Light

The more weight you carry around in your car, the worse the fuel economy is likely to be. So empty your boot as much as possible and remove the roof rack if you’re not using it. The latter will also aid fuel economy by reducing air resistance.

Check Your Tyres

According to the RAC, tyres under inflated by 15 psi – a difference you might not notice visually – can use 6% more fuel. Not only that, under-inflated tyres wear out faster, meaning you will need to replace them sooner.

You can check your tyre pressure at most filling stations or buy an electric pump (like this one maybe). The correct pressure for your tyres will be in the owner’s manual or handbook.

Drive for Fuel Economy

There are many ways you can improve the fuel economy of your car. One of the best and simplest is to avoid braking and accelerating sharply. That means reading the road, anticipating changes in gradients and traffic conditions, and making any necessary adjustments in good time. A good satnav (see example ad below) can help with this.

Another tip is to keep your speed moderate. According to government statistics, driving at a steady 50 mph rather than 70 can improve fuel economy by 25%. For most cars the sweet spot is between 50 and 60 mph. Once you get much over this, fuel economy starts to drop rapidly.

Finally, having lots of electrical devices running – from heating to aircon – can reduce fuel economy as well, especially at lower speeds. So try to keep this to a minimum, but without of course compromising your comfort or safety.

Shop Around for Petrol

Clearly driving miles out of your way to save a penny a litre isn’t likely to be cost-effective. But if you have a choice of local filling stations, it is well worth monitoring them regularly to see which is cheapest.

There are also various websites that can help you check prices locally, though you may have to register with them to view full details. Two to try are Petrolprices.com and GoCompare.

Don’t Fill Your Tank

Petrol is heavy, and the added weight will reduce your car’s fuel economy. Ideally don’t fill your tank more than half-way, though of course this may not always be practical.

Don’t Rev the Engine When Starting

This is something that until recently I was guilty of myself, having grown up in the days when you had to do this to prevent a cold engine from stalling.

But with modern cars, many of which have computer-controlled ignition systems, it is no longer necessary. If (like me) you still do this habitually, train yourself to turn the ignition and keep your foot well away from the accelerator pedal. This will save petrol and help with fuel economy.

Consider Car Sharing

Car sharing can work well if someone else you know is travelling the same route as you, ideally on a regular basis. You can split the fuel costs and (if you both agree) the driving duties. And as fans of Peter Kay’s Car Share will know, you can make new friends and enjoy some stimulating conversations too!

For one-off journeys, you could try ride-sharing. The website BlaBlaCar lets you search for other drivers who are making a similar journey and have space for you in their vehicle. Alternatively, if you are planning a long journey you can help defray the cost by offering to take one or more paying passengers. Fees are paid in advance via the website, so there is no awkward passing over of cash on the day.

There are also ‘car pool’ companies like ZipCar that offer members the opportunity to hire a car from their fleet when needed for a modest price. If you only require a car now and then, this could be a cost-effective alternative to owning a car yourself.

Shop Around for Motor Insurance

It’s easy to fall into the habit of renewing every year with the same insurer, but there are big savings to be made by shopping around.

Use a price comparison service such as Go Compare or Confused.com to get quotes from a range of insurers, therefore. But also check cashback sites such as Top Cashback and Quidco, which have some good offers too. For example, Top Cashback are currently offering up to £20 cashback on car insurance from the AA.

One other top tip is to get a quote for fully comprehensive insurance, even if you normally opt for third party, fire and theft (TPFT). Surprisingly, because of the way insurance companies’ algorithms work, comprehensive insurance often comes out cheaper, even though you are actually getting better cover.

Go Electric

Finally, if you haven’t done so already, you could consider going electric (or hybrid).

Electricity prices are going up at the moment too, but you should still save a lot compared with buying petrol or diesel. Electric cars are obviously expensive but prices are starting to come down and there is a growing second-hand market as well. This article from the Buyacar website includes a useful round-up of the pros and cons of electric cars.

If you have any comments or questions – or any other tips for saving money on motoring – please do leave a comment as usual.

If you enjoyed this post, please link to it on your own blog or social media:

March 21, 2022

Can I Rent Out My House With Equity Release?

Nick Everything Else retirement, events, property 0 Comments

This is the third in a series of collaborative articles on the subject of equity release. This one looks at the important question of whether you can still rent out your house (or part of it) if you take equity release.

As the equity release industry expands, UK-based older homeowners are being offered more flexible retirement mortgage solutions to combat the problem of insufficient funds in retirement.

While equity release is a fantastic product, there are some terms and conditions that may put limitations on what you do with your property.

74% of UK-based retirees own homes, and many of those live in large family properties where the kids have moved out. With the chance to make up to £7,500 tax-free a year through the government’s Rent-a-Room scheme (including qualifying Airbnb lets), renting out a room or your whole property can be a great way for retirees to generate extra income.

But if equity release is something you’re considering, the big question is, can you rent out your house after taking equity release?

Equity release expert John Lawson of SovereignBoss explores this topic in the following report to help you understand all the equity release criteria to ensure you make a sound decision.

Table of Contents

What is Equity Release?

Equity release is a financial product designed for older homeowners to unlock the cash in their property while still living there.

What’s great about these products is that repayments are completely voluntary and there is no risk of foreclosure. Instead, the loan and any compound interest are repaid when the last homeowner passes away or enters long-term care. Money taken through equity release is tax-free and can be used for any purpose.

Finally, equity release borrowers can opt to release their money in a lump sum, place it in a drawdown facility, or receive it as a monthly income.

Lodgers v. Tenants and Equity Release

One of the key components to an equity release loan is that you need to live in your home for at least six months a year and it must be considered your primary residence. Does this mean you can welcome lodgers or tenants?

There are some key differences between the two:

A Tenant – A tenant generally has more rights than a lodger due to a Tenancy Agreement. The landlord will need to get permission to enter the rented space and must conduct regular gas safety checks (if gas is connected). Once a contract is signed, a landlord can evict the tenant after six months, providing acceptable practices are followed. A landlord will also need to return the tenant’s deposit as per The Tenancy Deposit Scheme (TDS).
A Lodger – On the other hand, a lodger can be removed from the property at any time, given ‘sufficient’ notice. This is usually 28 days but can be less. A big difference between a tenant and a lodger is that a licence is signed instead of a lease agreement. The document will set out the terms and conditions of the agreement and the rules of the property.

Very importantly, the general rule with equity release is that homeowners may have lodgers but not tenants. (1)

Can I Rent Out My Home with Equity Release While I’m on Holiday?

In short, no. As per the logic above, you may not rent out your home while you’re on holiday, even if you live in the property for only six months a year. That being said, these rules could differ from one lender to the next. Therefore, should you receive income from renting out your home for half a year while moving to your holiday home, it’s worth consulting your financial adviser to see if they can find an equity release plan that permits this.

Airbnb and the Rent-a-Room Scheme with Equity Release

The great news is that Airbnb and the Rent-a-Room scheme are both considered to be lodger agreements, so you can rent out one or more rooms in your home using one (or both) of these options. With the UK being a popular tourist destination, this is a great form of retirement income, and you have the opportunity to mingle with guests and entertain people from across the world.

Of course, some areas are more popular than others for this. But even if you don’t live in a tourist hot-spot, there may still be a demand for short-term accommodation for people attending business meetings, conferences, sporting events, concerts, and so on.

In Conclusion

Equity release is a great way to gain access to property wealth, but can limit your opportunities to make money through rentals. It’s therefore important to weigh up the pros and cons carefully.

Your best bet is to discuss your future plans and intentions with your financial adviser. In general, as stated above, you can’t rent out your home once you’ve unlocked equity. But you can usually make extra income by taking lodgers, and that can be a great way to keep you busy (and supplement your pension) during your retirement years.

This is a collaborative post.

If you enjoyed this post, please link to it on your own blog or social media:

March 18, 2022

How Will Rising Interest Rates Affect the Short Term Future of the Equity Release Market?

Nick Making Money events, property, retirement 0 Comments

This is the second in a three-part series of collaborative posts about equity release. This article looks at the likely effect of rising interest rates on the equity release market.

The equity release industry is booming. Homeowners from across the UK may find the financial freedom they desire by unlocking one of these attractive products.

If you’re a homeowner over 55 and haven’t heard of equity release, you need to do your research. These products allow you to access cash tied up in your property for any purpose you wish. No tax is payable on this money, and you will never be obliged to move out of your home.

John Lawson from SovereignBoss has done extensive research on the future of the equity release interest rates. He has discovered that after reaching an all-time low in March 2021, equity release interest rates are rising. The big question is, how significant will the rate increase be, and will this have a short-term effect on the industry as a whole? Let’s take a look at what Mr Lawson has to say.

Table of Contents

Interest Rate Increase

When interest rates rise, the equity release sector is inevitably impacted as well. In March 2021 interest rates hit a historic low, with some homeowners having the opportunity to unlock equity with fixed rates as low as 2.3%. This unprecedented rate drop was exciting because it wasn’t much more expensive for a homeowner to opt for an equity release than it was to have a traditional mortgage. Plus, with no repayments required in one’s lifetime, retired homeowners could save a fortune by eliminating monthly mortgage payments. (1)

Recently interest rates have increased slightly but are still quite low. Current rates range between 2.9% and 6.4%. The interest rates you achieve will be lender-dependent, but they will also be determined by your age, health condition and property value.

Experts predict that interest rates are set to rise until 2024. And with the latest announcement by the Equity Release Council (see below), now could be the cheapest opportunity to access the cash tied up in your property through an equity release mortgage.

New Compulsory Optional Repayments

In addition to interest rates rising but still being stable, on 31st March 2021, the Equity Release Council enforced guidance on lenders to offer all their lifetime mortgage clients the option for penalty-free voluntary repayments. This means that homeowners can now repay up to 40% of the amount borrowed each year.

The exact offer you receive will depend on the lender you select. But in principle, if you have the means to do so, you could pay off your equity release plan within three to 10 years, restoring your property’s value.

But that’s not all. Once you’ve released equity, there is no risk of foreclosure. You can stop and start making repayments whenever you wish. Voluntary repayments are a great idea if you can afford them, as they reduce the overall cost of your loan by preventing compound interest.

So How Badly Will the Industry Be Affected?

With interest rates still reasonable and the above announcement by the Equity Release Council, the industry is set for another record-breaking year. Eighty percent of experts agree that the industry’s value is rising, and we at Sovereign Boss are excited to see further innovation from lenders and the Equity Release Council.

In Conclusion

Whether now is the best time to opt for an equity release product is very personal. You will need to consult a financial advisor who will help you determine the best course of action for your needs. If it’s in your interest to unlock equity at this stage, however, you’re likely to find a fantastic deal, with product flexibility better than ever.

So, while interest rates are rising, they’re not too much of an issue at this stage. And there is certainly no indication that there will be any short-term impact on the equity release industry. On the contrary, we are set for another record-breaking year.

That being said, it’s too early to predict the long-term impact that interest rates increase will have on the industry. But SovereignBoss considers it their responsibility to keep you updated with the latest industry trends.

This is a collaborative post.

If you enjoyed this post, please link to it on your own blog or social media:

«< 13 14 15 16 17 >»