Is my pension secure and my mortgage rate reduced? What should we do in the current crisis? Consumer Affairs


What does economic uncertainty mean for home prices?
House prices may decrease next year, but it is not yet clear how much. Credit Suisse has warned of a decline of between 10% and 15% next year, while the Graham Cox Center for Self Employed Mortgages has predicted a 20% decline over the next two to three years.

Is the rent going to go up as well?
Due to housing shortages in cities such as London and Manchester – so far – rents have started to rise as a direct result of rising mortgage rates and are expected to rise further in the coming months. However, if buyers continue to rent because they are unable to get on the housing ladder, this additional demand could put further pressure on private rental prices.

Landlords could be forced out of London and the south-east, if mortgage rates rise above yields, to invest in properties further north, which could lead to rent growth in the capital, says David Fell, senior analyst at Hamptons.

Should I wait to buy?
Buyers holding cheap mortgages could push ahead with the move, despite fears that house prices could fall in 2023. People who don’t get credit can be stuck for a while, said executive director Richard Donnell. Research and Insights at Zoopla. “If we see the political environment stabilize, mortgage rates may bounce back quickly, but not to the levels we saw last year – 2% mortgage rates will be a thing of the past,” he said.

What will the mortgage rate be?
Hopes of calmer market conditions that would push rates lower have so far failed to materialize and the Bank of England’s chief economist said a “significant” rate hike was needed in November. David Hollingworth, of broker L&C Mortgage, said that while mortgage providers had recently been confirmed by the new chancellor, it could take time to demonstrate affordability. “We continue to see lenders release products with little notice, replacing them with higher rates in order to stem the flow of new applications.”


When we hear that pensions are getting crowded, which pension do we mean?
The Bank of England has deployed billions of pounds to buy government bonds in a bid to stabilize things after a small budget led to a sell-off by pension funds – but with a view to a certain type of pension. Pension funds that use a “defined benefit” – or “final salary” – retirement investment strategy are known as liability-based investing (LDI).

It does not mean government pension. And it doesn’t mean “separate contribution” – or money purchase – pension plans. Most workplace pension schemes and all personal pension schemes are defined contribution schemes.

This particular issue has no impact on almost all public sector direct benefit pension schemes, most of which are “unfunded”, meaning pension income is paid from taxes, not investments, explains Tom Selby, head of pensions policy at Investment Forum. .

Is my pension secure?
With direct benefits, employers are responsible for making up any shortfalls. “This is a problem for your employer to solve, not you,” said Sarah Coles, senior personal finance analyst at Investment Forum. “If the sponsoring employer stays in business, you should receive the promised pension,” Selby added.

Even if the worst happens and the employer stumbles and cannot fund the plan, the official pension protection fund will step in and pay compensation (either 100% or 90% of income).

Markets for defined contribution plans, which invest in things like stocks, bonds, property and cash, have been falling recently, and Selby says, so those in defined contribution plans with large holdings of UK government bonds will see their value. Financial reduction.

Is there any good news?
When interest rates rise, so do annuity rates, and they are now at a 13-year high, which would mean more income in retirement a year or two earlier. An annuity is one of the products you can buy with your accumulated pension pot, which will provide you with a regular retirement income for the rest of your life or for some time. Earlier this year, a pot of £100,000 would have bought a 65-year-old a modest annual income of £4,950 a year, but today it would be around £7,190, says Hargreaves Lansdowne.

Savings and investments

Interest rates are up so I’m finally making some money – right?
As interest rates rise, so do savings rates, but this is not always the case as lenders cannot pass the full increase or take months to do so. Atom Bank launched a pay-as-you-go account this past week, so it’s possible to earn 5% interest, but you’ll have to lock in your money for five years to get that rate. Any gains in the savings rate must be seen against the backdrop of inflation, which is eating away at the value of people’s cash.

What happened to my stocks and shares ISA? Should I stick with it?
Stocks have seen a dip in the past year. “There’s nowhere to hide in 2022,” said Jason Holland of BestInvest. “Both global stocks and global bonds have fallen sharply together. So should you try and stop losses from stocks and share by moving your ISA elsewhere? There’s no point in panicking,” says Hollands. “While the outlook for the UK economy is grim, UK stocks Don’t confuse the market with the domestic economy. Three-quarters of FTSE 100 companies’ revenues are generated overseas, most of them in US dollars, so when the revenues are converted into pounds, this should improve slightly.

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