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October Newsletter 2011

Welcome to our Autumn Newsletter. With university fees set to dramatically increase from next year it may be easier than you think to start putting a plan in place to help fund your child’s education.  And as household budgets continue to feel the squeeze, we illustrate how important it is to shop around when it comes to financial planning advice.

In this issue:

Do you know what your bank charges you?

We were recently contacted by an individual who had invested their entire ISA allowance (£10,680 in the current tax year) with their bank. They were surprised and dismayed when they discovered that the initial charge taken from this investment by the bank was equal to 5% of the investment total (or £534 based on the current ISA allowance).  When they subsequently inherited a more substantial sum of money, they decided to shop around and compare the difference in charges (and service) between their existing bank and those of an independent financial planner.

They came to us and because we charge a fee rather than a percentage of investment we were able to save them an amount equal to 3% in initial charges, enabling them to invest more of their money.

Charges of 5% seem to be fairly typical with banks and building societies but lower fees can often be found by looking elsewhere. In fact, a recent study by the British Population Survey of 16,000 people revealed that 50% of customers who bought products from banks and building societies either didn’t know what the charges were or thought there were no charges at all!

Clearly fees are an important consideration and understanding exactly what they are should be part of every investment decision you make.  It pays to shop around and search for fee based advice where possible.

Mortgage availability improves

Although the UK property market remains fairly sluggish, conditions have eased slightly for potential borrowers.  Mathew Clamp, our Mortgage Principal, is certainly noticing a positive difference compared to just 12 months ago, with some extremely competitive rates available.

According to figures from price comparison website Moneyfacts, the number of available mortgage deals has risen to its highest level since December 2008. Lenders are now competing for mortgage business which has led to a welcome decline in mortgage rates;  average rates for fixed and tracker mortgages have reached their lowest level since 1988.

Prospects for first-time buyers also appear to have brightened.  According to Moneyfacts, “Lenders appear to be applying the recent cuts equally across all loan-to-value tiers, which is good news for first-time buyers.”  Figures from the CML show that first-time buyers are now borrowing an average of 80% of their property’s value as lenders are still reluctant to offer 100% mortgages.  This is also a noticeable shift away from interest only mortgages which were far more popular before the financial crisis.

The CML expects the mortgage market to remain stable over coming months;  UK interest rates have now been at an all-time low of 0.5% since March 2009 and lenders do not appear to expect an increase in the near future.  However, many lenders are still not sharing with borrowers the full benefit of the fall in funding costs and mortgage rates are certain to rise again as soon as lenders believe an interest-rate rise is imminent.

For assistance with your own mortgage review or property purchase, please contact Mathew Clamp who will be pleased to answer your queries.

University Fees – how are you going to help your child?

With University tuition fees of approximately £9000 per annum at some universities (from 2012), an average 3 year course is likely to cost more than £50,000, by the time you have factored in the costs of rent, food, clothes, entertainment and study materials.

If you are planning to help finance your child’s university education, you might wish to consider helping to pay the fees and costs as and when they fall due, or alternatively you may prefer for your child to receive the relevant tuition and maintenance loans available and then help to repay them once your child graduates.

Whilst the second option might be worth considering if you need more time to accumulate sufficient savings, you can substantially increase the financial assistance you can offer simply by planning ahead and taking steps right away.

If your child then chooses not to go to university, the sum you will have saved can be used to help them get onto the property ladder.  Either way you will be giving your child the best start you possibly can.

The sooner you start to plan the greater the potential funds you can achieve.   Please contact us for practical ideas that you can start implementing today.

National Financial Planning Week

Monday 21st November sees the start of National Financial Planning week which aims to raise awareness of the importance of financial planning and its role in enabling consumers to be in control of their finances and their future.

We will be issuing our Top Tips on how to kick start your own financial plan and take positive steps towards achieving your financial goals.  We will post these onto our website and will send you a reminder on the 21st once they are live so that you can download them and start putting them into practice.

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