You’ve probably heard a lot about interest rates rising and affecting the cost of borrowing for mortgage holders over the last two years. But what exactly do higher interest rates mean for you? Read on to find out. 

Borrowers benefited from more than a decade of low interest rates. Between May 2009 and April 2022, the Bank of England’s (BoE) base interest rate was below 1%, so the interest added to debts was relatively small. However, that’s now changed. 

As the UK economy recovered from the Covid-19 pandemic and inflation reached a 40-year high, the BoE started to increase its base rate. As of August 2024, it stands at 5%.  

As inflation fell to the BoE’s 2% target in May 2024, the BoE began to cut interest rates in August 2024. Yet, it’s very unlikely to go back to the historic lows that benefited borrowers previously. 

A mortgage is often among the largest loans you’ll ever take out. So, it’s important to understand how interest rates might affect the cost of borrowing. The interest rate you’re offered could affect your outgoings now and how much your mortgage costs overall. 

The interest rate you pay has a direct effect on your outgoings

When you take out a repayment mortgage, each month, you’ll pay the accrued interest and a portion of the amount you initially borrowed. As a result, the interest rate has a direct effect on your outgoings.

As you typically borrow large sums to buy a home, even a seemingly small change in the interest rate could have a large effect on your regular expenses. 

The table below shows how your monthly repayments would change depending on the interest rate if you borrowed £200,000 through a 25-year repayment mortgage. 

Source: MoneySavingExpert

In this case, a change of just 1% adds more than £100 to your mortgage outgoings. If you borrowed more through a mortgage, the difference would be even more stark.

Shopping around to find a mortgage with a lower interest rate could help reduce your day-to-day outgoings. 

A higher interest rate could mean you pay thousands of pounds more over the mortgage term

It’s not just your monthly budget that’s affected by a higher interest rate. It could affect your financial future more than you expect, as you could pay significantly more over the full term of the mortgage. 

Using the same scenario as above – borrowing £200,000 with a 25-year repayment mortgage – the below table shows how the total cost of borrowing is affected by the interest rate. 

Source: MoneySavingExpert

As you can see, a 2% difference in the interest rate means that over 25 years, you’d pay far more in interest. That extra money could make a huge difference to your financial security or lifestyle. Perhaps you could contribute it to your pension so you’re able to retire sooner, or spend it on holidays to create memories with your family. 

The good news is that there are some steps you can take to reduce how much mortgage interest you pay, including:

• Put down a larger deposit: The more equity you hold, the less of a risk you pose to lenders. So, a lender is more likely to offer you a favourable interest rate if you’re able to put down a larger deposit.
• Review your credit report: Lenders will use your credit report to assess how risky lending to you is. Taking some time to review it first could help you identify red flags and potentially fix them so lenders are more likely to offer a lower rate of interest. 
• Make mortgage overpayments: If you can, overpaying your mortgage can reduce the amount of interest you pay overall. Any overpayment you make will reduce the outstanding balance and allow you to pay off your mortgage faster. Keep in mind that you may have to pay a fee when overpaying, so it’s important to check your paperwork. 
• Shorten your mortgage term: How long you pay your mortgage also affects the total cost of borrowing. As a result, opting for a shorter term could save you money overall. However, it would also increase your monthly repayments.
• Work with a mortgage adviser: There are lots of mortgage deals available to choose from, and it can be difficult to know which is right for you. A mortgage adviser can review deals on your behalf and potentially secure you a better interest rate.

Get in touch if you’d like expert advice when searching for a mortgage

If you’d like to benefit from our expertise when you’re searching for a mortgage, please contact us.

We’ll take the time to understand your mortgage needs, circumstances, and priorities, so we can find a deal that suits you and could potentially help you secure a competitive interest rate that saves you money. We’ll also be on hand throughout the application process to answer your questions and offer guidance. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Think carefully before securing debts against your home.

Failing to set out your wishes in a will could mean your assets aren’t passed on to the loved ones you’d like to benefit from your estate. As a result, this could have a significant effect on your legacy. 

A will is one of the main ways to ensure your assets are passed on to your loved ones according to your wishes. So, if you don’t have a will in place, what will happen?

Intestacy rules are applied if you pass away without a will

If you pass away without a valid will, also known as “intestate”, the way your estate will be distributed will follow strict rules, which could be very different from your wishes. 

In England and Wales, if you’re married with no children, everything will go to your spouse or civil partner. If you’re married with children, your spouse or civil partner will inherit:

• Your personal possessions
• The first £322,000 of your estate, and
• Half of your remaining estate, with the other half being shared equally among your children. 

If you’re not married and have children, your entire estate would be divided equally between your children.

If you’re not married and don’t have any children, your estate would be shared equally among one of the following groups of people in this order:

• Parents
• Siblings, or nieces or nephews if your siblings have passed away
• Grandparents
• Aunts and uncles. 

Finally, if no living relative can be found, your estate will pass to the Crown. Most of these funds go to the Treasury. According to the BBC, as of November 2023, there were more than 6,000 people on the government’s list of unclaimed estates.

As you can see, intestacy rules might mean some family members or friends who you’d like to benefit from your estate are overlooked. It’s not just about wealth either, as you may have sentimental items you want to go to a particular person. Perhaps you’d like your granddaughter to inherit your jewellery, or pass on your record collection to a music-loving nephew. 

Intestacy rules also don’t consider whether you’d like a portion of your estate to go to organisations or charities you might wish to support.

By not writing a will, you’re missing out on an opportunity to set out exactly who you’d like to benefit from your estate.

Despite this potential impact on your legacy, research from the IRN Legal Wills and Probate Consumer report suggests just 36% of UK adults have a will. 

5 other practical reasons to write your will

Ensuring your assets are passed on to your intended beneficiaries isn’t the only reason to prioritise writing a will if you haven’t already. Here are five other practical reasons.

1. Name a guardian for your children

If you have children under the age of 18 or other dependants, you can use your will to name their appointed guardians if the worst should happen and you pass away. A guardian would take full responsibility for your children until they reach adulthood. If you have not named a guardian, the court will appoint one, who may not be the person you’d choose. 

2. Set out your funeral wishes

While funeral wishes listed in a will aren’t legally binding, they can be very useful for your loved ones. Organising a funeral while grieving and putting affairs in order can be stressful, and your family may worry about making the “wrong” decision. Making a note of your preferences could provide much-appreciated guidance. 

You might also decide to set money aside to pay for your funeral in your will too. 

3. Potentially reduce an Inheritance Tax bill

If your estate exceeds the nil-rate band, which is £325,000 in 2024/25, it could be liable for Inheritance Tax (IHT). In some cases, your will could be used to potentially reduce the bill.

For example, if you leave your main home to your children or grandchildren, you’ll usually be able to use the additional residence nil-rate band, which in 2024/25 could increase the amount you can pass on before IHT is due by £175,000. 

There are often other ways you can reduce an IHT bill. If you’d like to discuss estate planning that considers IHT, please contact us.

4. List the executor of your will

An executor is responsible for carrying out the instructions in your will and handling your estate. It can be a time-consuming task, and one that some loved ones may find difficult. So, you might want to take some time to consider who would be suited to the role and name them as the executor in your will.  

You can choose a family member or friend to be an executor. Alternatively, you may appoint a professional executor, such as a solicitor or accountant, which could be especially useful if your estate is large or complex.

5. State who you’d like to care for your pets

If you have pets, you can use your will to set out your wishes regarding their care, including who will look after them. While you can’t leave assets directly to your pets, you might want to set aside some money for the person who will care for them to cover the costs. 

Understanding your estate could be valuable when you’re writing a will

If you need to write a will, understanding your estate could be a valuable place to start. Considering your assets and how the value of them might change during your lifetime could affect how you wish to pass them on. 

Please get in touch to talk about your estate plan, from what you want to include in your will to how to mitigate a potential IHT bill. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.

The trend for wanting your money to have a positive effect on the world when you invest has been growing. If it’s something you’ve considered, the terminology might seem confusing with phrases like “ESG investing” and “impact investing” used interchangeably.

Read on to discover what the difference is and how it might affect your investment decisions. 

ESG and impact investing share similarities but take different approaches 

ESG investing incorporates environmental, social, and governance factors

When you’re making investment decisions using ESG criteria, you’ll consider environmental, social, and governance factors. You might look at a company’s ESG performance. You’d then incorporate these factors into your usual decision-making process. As a result, it may be a useful way to identify businesses that have good ESG practices.

With this information, you might decide to avoid investing in certain companies because their ESG performance doesn’t align with your views, or focus your investments on those that do.

Impact investments aim to have a measurable social or environmental impact 

The Global Impact Investing Network defines impact investing as “investments made with the intention to generate positive, measurable social and/or environmental impact alongside financial return”. Impact investors might target specific sectors or issues that are important to them.

As you can see, while both ESG and impact investing have similar aims, the approaches are different.

In both cases, investors aim to make their values part of their decision-making when deciding how to invest and consider the long-term opportunities and risks. However, impact investing requires investors to measure the impact of their investments.

For example, if climate change is an important issue to you, when you’re taking an ESG investing approach, you might assess a company’s carbon emissions and the steps they’re taking to reduce them. This could lead to you excluding certain businesses from your investment portfolio, such as fossil fuel companies.

Now, if you took an impact investing approach, you’d search for companies that are having a measurable impact on reducing climate change risks, such as firms operating in clean energy or carbon capture technology.

There are ESG and impact investment funds available to choose from. A fund will pool your money with that of other investors to invest in businesses that meet the fund’s criteria. So, you can still incorporate ESG or impact investing values if you prefer to take a hands-off approach.  

Should you choose ESG or impact investing?

There’s no right or wrong answer when you’re deciding between ESG and impact investing – it will depend on your preferences and personal values.

Some investors prefer integrating ESG investing into their existing portfolio. For others, impact investing might allow them to focus on key issues that are important to them. You might even decide to incorporate both ESG and impact investing principles into different parts of your portfolio.

If you’d like to discuss which option is right for you, please get in touch. We’ll take the time to understand your priorities and offer tailored advice that considers your values and goals. 

It’s still important to consider your personal investment goals and risk profile

Whichever option you choose, if you want to incorporate your values into your investments, it’s still important to consider your circumstances. For example, you may consider your:

• Investment goals: While you might want to have a positive impact on the world through your investments, your personal goals are still important – what is your reason for investing? Whether you want to retire early or support loved ones, your answer will often affect investment decisions, including how much risk to take. 
• Investment time frame: With a goal defined, you should have a clearer idea about how long your money will be invested. Typically, you should invest with a long-term time frame of at least five years. Your time frame might also affect your risk profile. 
• Risk profile: All investments carry some risk, but it varies between opportunities. So, it’s important to understand what level of risk is appropriate for you. Several factors may influence your risk profile, including your goals, investment time frame and how comfortable you are with risk. As financial planners, we could help you understand your risk profile. 
• Diversification: Creating a balanced portfolio could reduce how much volatility you experience by investing in a wide range of sectors or geographical locations.

Making your investment decisions part of your wider financial plan could help you make decisions that are right for you and your aspirations. 

Contact us to talk about your investment portfolio

If you want your investment portfolio to reflect your wishes and have a positive impact on the world, please contact us. We could help you balance your values with your financial goals to ensure your portfolio continues to reflect your circumstances and risk profile. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

It doesn’t matter how much you prepare; sometimes unexpected life events could mean your carefully laid plans go awry. While you can’t know what’s around the corner, you can change how you respond to unpredictable events to help keep your financial plan on track.

A life event could have a huge impact on your wealth, both now and in the future. Circumstances outside of your control might even lead to you changing your long-term goals. So, even if you already have a robust financial plan in place, a review following major life events could be helpful. 

Here are four unpredictable life events you might have experienced that could mean you’d benefit from updating your financial plan. 

1. Experiencing redundancy

Redundancy could have a huge effect on both your short- and long-term finances.

In the short term, you might need to dip into savings or other assets to cover your essential outgoings. As you may stop contributions towards your long-term goals, such as adding to your pension for retirement, it could also mean you face an unexpected shortfall in the future. 

You might also receive a redundancy payout, which you want to understand how to use to improve your financial security. 

According to data from the Office for National Statistics, around 3.4 employees in every 1,000 were made redundant between March and May 2024. A separate poll from SurveyMonkey also found that 58% of employees feel uncertain about their future job security. 

If you’ve been made redundant, a financial review could help you identify ways to manage your finances while you search for employment, and then assess the potential long-term impact. 

2. Taking time off work due to an accident or illness

Needing to take a long time off work due to an accident or illness could leave you in a financially vulnerable position. Much like redundancy, it could affect both short- and long-term finances. 

You might think the chances of you being unable to work for an extended period are slim. However, figures released at the start of 2024 and published in the Guardian, highlight how many people are affected by unexpected illnesses. According to the data, 2.8 million people were not working due to long-term sickness at the start of the year. 

If you’re unable to work, a financial review could help you assess how to use your assets to create a regular income to cover essential outgoings. It might also consider how you could keep long-term goals on track. 

3. Separating from your partner

Whether you’re married or not, separating from your partner may have large implications for your financial security. Separating when your finances are intertwined could have a substantial impact on your household income, regular expenses, and even long-term wealth creation. 

Indeed, research led by the University of Bristol found that equal division of joint assets, including property and pensions, was not the norm during divorce. It only occurred in around 3 in 10 cases. This means that one person was likely to miss out financially.

Working with us to assess your financial plan following a separation could help you understand how your assets have changed and what steps you might need to take to improve your financial resilience. 

A financial review isn’t just useful for assessing your assets. Following the breakdown of a relationship, your lifestyle goals and long-term aspirations might have changed too. So, updating your financial plan could ensure it continues to reflect the future you want. 

4. Receiving an inheritance 

Unexpected events don’t always harm your finances. Indeed, if you receive an inheritance or a windfall, it could provide you with greater financial freedom than you previously had.

Receiving a large lump sum out of the blue might feel overwhelming, especially if it’s through an inheritance and you are dealing with the loss of a loved one. When you’re ready, seeking tailored financial advice could help you understand how to use the wealth in a way that aligns with your goals. 

Have you experienced an unexpected life event? Contact us to review your financial plan

Whether you’ve experienced one of the four unexpected life events listed above or you’ve been affected in another way, we could help you assess your financial plan to ensure it continues to reflect your new circumstances. Please contact us to arrange a meeting with one of our team. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.