Money Times - July 5, 2016

Posted by Jill Kerby on July 05 2016 @ 09:00




The anti-Brexit referendum result means that quite a few readers, who were worried about their UK pensions, properties, bank accounts and even whether they would end up paying higher university fees for their children could end up worse off financially. We’ll answer some of these and other questions this week and next. 


What to do with cash was of particular interest to several readers:


Ms JN writes: I live and work in Northern Ireland. I will soon receive an inheritance of €50,000 from the sale of my late parents’ house (in the South). Is it better to open a bank account in the Republic or get it transferred directly into my bank account in the North? I'm a bit worried about exchange rates right now. I don’t want to lose too much in the transfer.


Sterling had been weakening against the euro this year, mainly due to concerns about Brexit. The ‘Leave’ vote further weakened the euro/sterling price – at time of writing it was 83 cent to the pound; the day before the referendum it was 77 cent so there has been a 10% shift. But this rate means that your transferred euro inheritance will buy you more in the North and is good news for visitors to the UK, for parents supporting children studying in the UK or for any of us who buy sterling denominated goods and services.(It’s bad news for anyone selling stuff into the UK or for Irish tourism.)


Transferring this €50,000 inheritance to your account in the North will boost its spending power by about €5,000, but sterling has fallen heavily against the US dollar as well and Britain is a huge importer. This will eventually be reflected in the price of your high street goods, the cost of oil and petrol in the North.




Mr SK writes:  I lived and worked in Birmingham receive both a UK old age pension and a small occupational one as I lived for more than 20 years in Birmingham. What is going to happen to my pensions?


Your pensions will continue to be paid. However, the fall in the value of sterling is going to impact on your spending power. But interest rates don’t stand still; they fluctuate all the time and a 10% “loss” today is not written in stone. The euro is not immune to falls either and could happen if EU recession returns or from Brexit contagion risk. A fall in the euro will counterbalance the sterling drop.


Since you can’t impact or even accurately time exchange rates, you need to concentrate on what you can do:  review your finances, especially if you have investment funds. You need to find 10% more spending power. Are you paying too much tax? Claiming all eligible social welfare benefits? Have you a spare room you could rent out via the tax-free Rent a Room Scheme or even AirBnB. Try to squeeze out more deposit interest you (see www.bonkers.ie for deposit rate comparisons). Could you get a part-time or casual job? Do you have stuff your could sell on Buy‘nSell, eBay or at your local car boot sale? Ever considered barter?  I know a retired accountant, a widower, who helps his family and friends (and their family and friends – word gets around)  prepare their tax returns in exchange for DIY jobs around his house, home cooked meals and baking that goes into his freezer. One ‘client’ even lends him their holiday apartment in Spain where he goes hill walking with his buddies every year.





Mr DR writes:  My girlfriend and I both have rented properties that are covering our repayments, and we are getting married in 2018. We both live at home with our parents and we are both working with a joint income of about €70,000.  I’m from a farming background and own a share of the farm and earn some farm income.  How favourable would a bank be to lend for a self-build on my own land, taking all this into account. Selling either of our houses would mean selling at a loss.


You don’t say how much you think it would cost to build your new home, but with a joint income of €70,000, under the new Central Bank rules, your mortgage limit would be €245,000. As existing owner you would have to produce a 20% downpayment on the total build price, or €49,000. However, the fact that both your properties are in negative equity and you are servicing two mortgages is not going to help your case, said Michael Dowling, a well known mortgage and financial adviser (www.mdowlingfinancialservices.ie).

According to Dowling the lender must stress-test their existing loans, even if they are cheap trackers, as well as any new one and the stress rate is between 5%-7%. “That alone might disqualify them from a new loan for their self-build.”He suggested that if you want to start the new build anytime soon, that you first pay off one of the existing negative equity houses with your existing (and ongoing) savings and then apply for a negative equity loan. Hopefully you will be in a position to start building your new home by your wedding day.

Next week:  More of your letters

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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