In the news – October 2016

dog reading newspaperThe latest stories in the news, which may be of interest to our clients.

BTL borrowers penalised

Buy-To-Let borrowers are being penalised by lenders because of stricter new ‘affordability’ rules set by the Bank of England, says the Telegraph.  The new rules require a higher ratio of rental income to mortgage interest, though the Bank clearly said that the new rules should not apply to existing loans or to borrowers wanting to switch to a better deal. But some borrowers have found that they cannot transfer an existing loan to a new lender if it does not meet the new standards. The Nationwide, for example, said it now wanted rental income to be 145% of mortgage interest rather than its previous 125%.

Please note Donald Wealth Management does not provide mortgage advice.

Is ‘granny tracker’ the answer to rising care costs?

A new digital service that monitors elderly people could save thousands in care costs, says the Telegraph. The system can monitor life functions like pulse and blood sugar, as well as someone’s exact location and position, and transmit the information to relatives or remote carers. It can even check whether they have taken their medicines. The system is already in use in the US and uses sensors attached to devices in the home like TVs and fridges as well as to the person themself.

The loophole that saves tax on pension inheritances

The Telegraph reports on a loophole that enables people who inherit substantial pension funds to avoid tax on them. The rules say anyone with pension assets of over £1 million has to pay tax on the excess, usually at rates of 45% to 55%. The tax applies on death and inheritance, but there is an escape route. If the inheritor takes a cash lump sum of £1 million in the two-year period after the death of the person whose pension they have inherited,  they will pay no tax on that, and then they will only pay income tax on any amount they cash in thereafter.

Top up your pension? You need 30 pages and a massive flow chart

People answering questions about top-ups to the State pension on the government’s own help lines do not know the answers, says the Telegraph. This is scarcely surprising, it says, since it has taken the former pension minister Steve Webb 30 pages of text and a flow chart with 34 boxes to explain the choices in a new guide, which the Telegraph says is as clearly written as it could be given the monstrous complexity of the system.

Car insurance rates rise despite decline in fraud

Annual car insurance premiums have risen by £100 to an average of £697 over the past year, says the Telegraph. And the gap between the highest and lowest premiums for a given group of drivers has also increased, while drivers in the 25-30 age group face even bigger increases. Previously, insurers have blamed insurance fraud for rising premiums, but the Telegraph says the cost of ‘cash for crash’ fraud has declined over the past year.

Price rises ahead

As a result of the plunge in the £ – even larger than that forecast by the Remainers in the run-up to BREXIT – retailers are planning price rises of 5% after Christmas, says the Mail. Food and clothes retailers are likely to go first, but are reluctant to go public yet. Since over half the goods sold in the UK are imported, a 15% decline in sterling would imply a 7.5% average price rise, and even the lower rises in the pipeline will cost consumers over £15 billion a year.

Care home costs set to soar

Care home costs currently averaging £750 per week could rise to £1,000 per week by 2020, warns the Mail. Cost pressures mean 1500 care homes closed in the past six years and further pressures such as the Minimum Living Wage could lead to a new wave of closures, according to the Care Quality Commission. Some care experts expect average increases of 8% a year for up to the next ten years.

First Time Buyers courted by lenders

First Time Buyers with deposits of just 5% can still easily find mortgage offers, despite the withdrawal of the government’s mortgage indemnity scheme it used to offer as part of the Help to Buy programme, says the Times. Over 30 lenders now offer 95% mortgages and loans to First Time buyers were up by 19% in August over the same month last year.

Please note Donald Wealth Management does not provide mortgage advice.

Annuity re-sale plan scrapped

Plans to allow people who have bought pension annuities to trade them in for cash have been scrapped by the government, reports the Financial Times. The proposal was controversial, with experts questioning how many people would actually have benefited and others pointing out significant scope for fraud and scams. The risk to consumers was the major factor in the decision, a government minister said.

Self-employed earnings lower today than 20 years ago

The average earnings of the self-employed are lower today than they were 20 years ago, says the Financial Times, citing a major new study. Today’s average earnings of £240 per week are lower than those of 1994-95 after adjusting for inflation. There has been a big rise in self-employment since 2000, with the numbers of self-employed rising by 45% to 4.8 million – one in seven of the workforce. But self-employment has changed – very few of today’s self-employed are running a small business or employing other people. Prime Minister Theresa May has ordered a review into whether employment regulations and practices are keeping pace with the world of work.

Why parents have to lie for a loan

Parents with small children have to lie to get mortgage, says the Independent. It reported a survey of parents in which two-thirds of those questioned admitted concealing the real costs of childcare in order to get the loan they needed. Under mortgage affordability rules, lenders routinely ask about childcare costs, but when these are deducted from their income, parents often don’t qualify for the loan they need – so they lie. Many are frustrated because most lenders’ assessments don’t take account of the fact that children qualify for free childcare hours from the age of 3, thus reducing parental costs.

Please note Donald Wealth Management does not provide mortgage advice.

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