What is the impact of Coronavirus on your financial planning?
Friday 13 March, 2020
As people are aware the Coronavirus has hit the economy in a disastrous way. As a result, the government has decided to act immediately with an emergency cut in interest rates from 0.75% to 0.25%.
Now the immediate question that clients are asking is can I get a lower mortgage rate?
We expect lenders to react to the fall in interest rates over the next few weeks
Banks have yet to react to this emergency rate cut as it is not a rate cut that was foreseen unlike previous cuts. One thing to note is that interest rates are already relatively low so there is only so much lower they can go, but we are watching closely as we do expect lenders to react to the fall in interest rates over the coming weeks. If you are currently going through the mortgage process there is no need to worry because we can take advantage of any imminent rate cuts by switching products without any real difficulty, so overall the Bank of England rate cut is good news for borrowers if lenders should react imminently.
Vishal Gulrajani, Financial Adviser in Goff’s Oak & Cheshunt, Hertfordshire said:
‘Although the Bank of England base rate cut is a good sign for borrowers it does mean that deposit based, and current account savers are increasingly worse off and in real terms losing out due to inflation. Unfortunately, Coronavirus has also had a massive impact on world stock markets, and we are currently seeing share prices and funds plummeting. However, we do expect Coronavirus to be a short-term phenomenon. As it wasn’t foreseen stock markets are falling because of the impact on business and trade. For anyone who has been investing over the long-term they will be concerned regarding the impact of this market correction on the value of their investments, but many clients will still have outperformed on a longer-term time horizon and we always recommend our clients invest for the long-term. We also discuss the possibility of volatility and short-term corrections with our clients, so they are prepared.
When we talk to clients, we discuss their personal financial situation and risk profile and if they don’t require their investments in the short-term, we encourage them not to sell during volatile periods. We also recommend that if clients have cash in deposit accounts that they do not need to access over the long-term (over five years) they could consider investing into these falling equity markets. If you haven’t yet invested your ISA or used your pension allowance for this tax-year we also recommend you review your financial planning and call one of our financial advisers so we can review your financial circumstances and any available tax-free allowances. For more information read my article - Use or lose your 2019/2020 annual tax allowances before 5th April 2020’
Vishal Gulrajani, Financial Adviser in Goff’s Oak & Cheshunt, Hertfordshire continued:
‘Lastly the impact of Coronavirus has meant a surge of enquiries about protection and especially income protection for the self-employed. The effect of the virus could be heavily felt in small/medium businesses where cash-flow is the most important consideration and cash reserves are relatively small. As a result, the loss of a key person including yourself, if you work alone, can severely impact the business and the family household. Most people are very concerned about how they will cope if they can’t work for more than a month. The government doesn’t provide anything to the self-employed and even if they did (talks of statutory sick pay to the self-employed in an emergency circumstance), it wouldn’t be enough to cover most people’s costs. The key message we are telling clients is be prepared and get income protection cover now. We recommend if you are self-employed or you are concerned about how you will cope if you have to self-isolate due to the Coronavirus you contact the Thomas Oliver mortgage broking team on 01707 872000. Our mortgage brokers can provide protection advice and recommend a suitable income protection policy.’
Overall borrowers should benefit from falling interest rates. Investors should review their tax -free allowances and consider investing in their ISA and pension, and the self-employed should take protection advice to protect their family at this difficult time.
Please note: The value of investments can fall as well as rise. You may not get back what you invest.