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The political uncertainty surrounding Brexit is showing no signs of letting up and, whilst it’s providing plenty of drama for the media, it may be leaving the average person feeling a little concerned, particularly when it comes to any potential ramifications for their personal finances.
MoneyMagpie asked Jane Clack, a money adviser at free debt advice provider PayPlan, for her thoughts on the everyday areas likely to be impacted.
It’s probably no surprise to those of us that go to the supermarket regularly that 83 per cent of people believe food shopping has got more expensive in the past six-months. That’s according to a report from research agency Trinity McQueen. That same report shows that 71 per cent believe food prices will increase even further when we leave the EU, with two-thirds worried that energy costs also will rise over the next year.
Some of these concerns may well be legitimate. Earlier this year, researchers at the University of Sussex found consumers could be paying £500 more for food each year post-Brexit, and several large power companies have already said that energy bills may be driven up by an increase in the cost of importing gas and electricity.
Of course, none of us know exactly what will happen to prices after March, but now may be a sensible time to review your monthly budgets and take a look at both your income and outgoings to decide where you could make savings if needed.
The Government has not provided any specific documentation yet regarding the impact on the UK property market. But, recent reports suggest the Governor of the Bank of England, Mark Carney, told UK ministers that property prices could crash by up to 35%, leading to some concerns amongst homeowners that property price falls could cause their homes to tip into negative equity. This estimation is based on the Bank of England’s ‘worst-case scenario’ stress tests on the economy.
If prices continue to hover around their current level, this is good news for existing homeowners, but much less promising for first-time buyers. Analysts, however, are currently split on when the best time to take on a mortgage will be, with some suggesting that it will be cheaper in a year or two if Brexit causes prices to fall.
With so much uncertainty at the moment, those looking to buy or sell should base their decisions on what they can afford, rather than being influenced by potential price increases or decreases.
Although the Bank of England gave some long-awaited relief to savers in August by increasing interest rates to 0.75 per cent, only the second rise to the base rate in the last decade, Mark Carney warned that a no deal Brexit would result in further increases to rates.
This would be good news for savers, but banks have been reluctant to pass the rate rise onto their customers. Moneyfacts found that at the start of September, a month after the base rate rise, seven of the ten biggest banks had failed to pass on the 0.25 per cent rate rise in full to their savers.
Although rate changes can have a significant impact on how much people are able to put away, this uncertainty is unlikely to change our advice towards savings. It is always wise to have an emergency fund to cover the unexpected costs, such as fixing the washing machine or your car failing its MOT. Martin Lewis from MoneySavingExpert.com says that at least three months is required, but recommends creating an emergency fund of at least six month’s worth of bills.
Although leaving without a deal at the end of March 2019 would put your travel plans in jeopardy, as airlines lose the right to fly between the UK and EU without shared regulations, it is expected that guarantees will be in place to keep air travel moving.
Although the pound dropped to its lowest value of the year against the dollar and euro in December, the current uncertainty and prospect of a no-deal Brexit means that sterling could continue to fall further.
If you are travelling overseas, it could be a shrewd move to buy your currency now before prices fall further.
While the current political uncertainty is doing little to help people plan their personal finances for 2019, particularly those on low incomes, my advice will rarely change. By focusing on what you can afford and building up an emergency fund to cover for any unexpected increases in prices, you can ensure that you are protecting yourself as much as possible.
If you are struggling with your finances or require free debt advice, contact PayPlan at www.payplan.com or call 0800 280 2816.
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