Are You Caring For Your Workers Enough?

As the old saying goes, if a job’s worth doing, it’s worth doing well. This is why companies look to find the best candidates for any given position, be it entry-level or senior management and also why they look to hold on to good workers. Obviously there is a monetary element to worker retention, but there are other ways to increase the odds of your staff staying with you. One of these elements is the aspect of health and happiness in the workplace.

Ill health can force early retirement

Recent research by the TUC showed that ill health forces up to 12% of workers to retire up to 5 years before their planned retirement date. The research highlighted the potential challenges involved in raising the state retirement age in response to extended life-spans. In simple terms, we may be living longer but that does not necessarily mean that we are able to go on working for longer. Whether or not it is feasible for any given individual to go on working into their late 60s and 70s depends on a number of factors. Some of these involve circumstances beyond an employer’s control, such as their family-health history, but others can be influenced by the workplace. Employers will already be aware of health-and-safety legislation and their legal obligation to keep their employees from being unreasonably exposed to harm at work, but there are many more steps employers of all sizes can take to promote healthy living on the part of their employees. This cannot only help them to make the most of older people in the workplace, but can also help to reduce disruptive absences due to sickness.

Appreciate ergonomics and use them wherever possible

Repetitive strain injury is a risk in any occupation where people repeatedly undertake a habitual action. In these days it is often associated with office workers using keyboards and mice, but it actually occurs across a variety of occupations “housemaid’s knee”, and “tennis-player’s elbow” are examples of this, even card dealers can get RSI from the recurring actions involved in dealing cards. Take a look at what your company does and how it does it to help to avoid these kinds of injuries.

The growing-bigger problem

It’s unlikely to come as a surprise to anyone that people in the UK are growing bigger and it’s not necessarily healthy. While the fundamental reason for this is that people are consuming more calories than they need for their lifestyle, the reasons why this is the case may vary. Employees may not know about healthy eating, in which case fun, work-place based events to educate them may make a difference. Alternatively, it may be an issue with time pressure, in which case there may be steps you as an employer can take to help them and thereby to help yourself. For example, you may find you need to wean people off a culture of working through lunch and into one of taking a break to eat properly and rest their minds. You may also need to encourage people to leave at the end of a standard work day, instead of working extensive overtime on a regular basis (even if it is paid). This may mean taking on more staff or outsourcing work to agencies or freelancers or automating it. The cost of this needs to be seen in the context of avoiding losing an employee and having to go through the recruitment process again, with all the disruption that can cause.

Exercise is about more than just weight

Possibly the most obvious reason for exercising is that it helps people to keep their weight down, but it can have other benefits too, for example team or club sports can have a social element. Even when budget is too tight for subsidised gym membership or other perks, there may be ways you can help. For example you could participate in the government’s cycle-to-work scheme.

High Street Prices And What A Lower Pound Means For Your Purse

There are winners and losers in every change and this also holds true for changing currency values. In the most basic terms, a weak pound means that you need more pounds to buy other currencies and less of another currency to buy pounds. An effect of this is that in practical terms, it costs more to buy in goods from overseas and less for people overseas to buy goods from the UK. As with many aspects of life, however, in the real world the situation can be a bit more complicated. Let’s take a look at how a lower pound can impact the high street in ways which may be less than obvious.

House prices and the high street

The UK housing market is core fodder for the press and can easily make headlines in the main body of popular newspapers rather than simply being relegated to the financial section. The weakness of the pound is almost guaranteed to have an impact on the housing market, although precisely what that overall impact will be is still unclear. The lower cost of doing business in the UK may attract international buyers and investors, but it may also make life more challenging for those looking to move abroad, who need to be able to finance a property purchase there. It may also influence how many international construction workers and tradespeople work in Britain. If house prices show signs of rising, then this may increase consumer optimism, but it may also mean that first-time buyers and those looking for bigger property may start to channel their disposable income into building up a deposit rather than using it for consumer spending. If house prices fall, it may drive some home owners into negative equity, for which they may try to compensate (or be obliged to compensate); thereby reducing the income they have available for consumer spending. On the plus side, however, lower house prices are great news for first-time buyers (and tend to be good news for those trading down), who could then use their disposable income on house-related consumer purchases (new appliances, furniture, décor etc.).

Holiday prices and the high street

Low fuel prices may be good news for the aviation industry, but a weak pound makes foreign holidays more expensive as it raises the effective price for everything from accommodation to food and entertainment. While the obvious candidates to feel the pain of this are travel-related companies such as travel agents and airlines, this could also have a trickle-down effect on other businesses. For example, holidays abroad can entail the purchase of new luggage, clothes and toiletries and may involve spending at airport stores. If foreign holidays become too expensive for the average consumer, they may choose to save their money instead, which could have a negative impact on the high street, alternatively they might choose to spend their money in other ways, in which case the high street might even benefit.

Employment and the high street

Employment is a major factor in whether or not people have disposable income to spend on the high street. A weak pound can make UK exports more attractive, although exporters will still have to account for the cost of buying in materials from overseas. A weak pound can also make the UK a more attractive prospect for investors when compared to lower-wage economies. At the same time, it can make imports more expensive and leave some retailers with a decision as to how much of the price increase they can absorb and how much they can, or want to pass on. If there is high employment, retailers may opt to absorb the price increases and compensate for the weak pound with higher demand. If, however, employment is weak, then retailers may have little choice but to pass the cost on to those who can still afford to pay it.

SME Finance Tips

SMEs’ needs are different both to those of individual freelancers and to those of big corporations. Here are some finance tips to help SMEs deal with the issues of pensions, loans and money-saving in general.

1. Pensions

Arguably the most important money-saving tip of all is to make sure that you are fulfilling all of your obligations under the auto-enrolment scheme. By this point in time, all companies with 30 or more employees should already have a work-place pension scheme running (with some exceptions for newer employers). Smaller companies will be obligated to join up in the near future. Since auto-enrolment is mandatory whether companies like it or not, it may be worth getting some professional advice on what specific options may minimise its cost to your company. Steps could include anything from passing out more work to freelancers, to phasing in your contributions at the minimum level permitted by law to deferring the enrolment of specific employees, to using salary exchange to pay contributions. To stay on the right side of the law and to make the most of the options available to you, it may be best to consult an expert.

2. Loans

Business finance for SMEs has been a simmering topic for years and the credit crunch has made it even more of an issue. Where conventional lenders hesitate, alternative lenders step in. For SMEs therefore, there are two keys to getting finance. The first is to make themselves as attractive a customer as possible. This is about more than just showing that your income is more than your expenses. It’s also about showing responsibility and consistency, for example always remembering to make payments on time. The second is about being ready to look beyond the established high-street lenders. Even if they’re prepared to offer loans, there may be far better deals available elsewhere.

3. Money saving in general

It may seem trite, but saving money starts with ensuring that you are protected against risks which could damage or even destroy your business, so start by making sure that you have enough of the right insurance cover, such as Employers’ Liability insurance and Public Liability insurance. Also make sure that you are clearly following all relevant laws such as Health and Safety laws and Equality and Diversity legislation. Breaking these laws, even unintentionally, can lead to fines, which can ruin a small business.

After this, many of the ways in which businesses can save money are similar to the ways in which private individuals can save money. Start by looking at basic bills such as energy and water. If you’re renting or leasing premises, then you may be slightly constrained by what your landlord will do, but you’ll only find out if you ask. Landlords tend to prefer to keep good tenants and if your request is reasonable, you may well find they’re prepared to act on it. Even with the constraints of renting, however, you may find that when you look into the matter, there are energy-saving measures old and new, which can make a difference. Old-fashioned draft-excluders can make a significant difference to heating bills, while modern energy-efficient mini-PCs are more than capable of most office tasks and need very little electricity to power them. On the subject of PCs, using services like Skype numbers can allow businesses to combine the solid impression given by a landline telephone number, with the cost-efficiency of internet telephony. This can offer substantial savings over using a traditional telephone system.

Interest Rates & Inflation

balloon-1051722_640In principle, interest rates and inflation act a bit like a child’s see-saw. When interest rates go up, people are encouraged to save rather than spend. This reduces demand, which encourages suppliers to lower their prices, which results in lower inflation. When interest rates go down, the reverse happens. That, at least, is the general theory. Of course, in the real world, many other factors can come into play. For example, if there is a bad harvest, then the price of the affected crop is very likely to go up regardless of what happens with interest rates.

Inflation and the economy

While the idea of continually-increasing prices may seem like bad news, it’s actually fundamental to a healthy economy. In essence it acts as a “call-to-action” to consumers, preventing them from waiting for prices to drop further. An example of how this works in practice can be seen in the stock market. When a company is experiencing steady growth, consumers are happy to buy its shares in the expectation that they will see a return on their investment. When a company’s stock price begins to drop, existing investors may try to sell their shares to mitigate their own losses, while potential investors sit on the sidelines to see how far the price will drop. At its most extreme, this sort of behaviour can lead to the classic “boom and bust” cycle.

Interest rates and asset prices

Interest rates can influence asset prices, including house prices. When interest rates go down, the cost of borrowing typically becomes cheaper. Up until relatively recently, this had the potential consequence of allowing consumers to take out larger mortgages, meaning that they were able to buy more expensive properties. Hence lower interest rates had the potential to feed into the demand for property and therefore to increase house prices. In recent times, however, the mortgage market review has tightened up the mortgage-lending market. Specifically it has forced lenders to look very closely at the likelihood of borrowers being able to manage a mortgage over the long term. This includes considering factors such as the potential for higher interest rates and the potential for borrowers to experience a reduction in income (or even a temporary loss of income). In principle, this could mean that, going forward, the level of interest rates at any given moment has, at most, limited influence on the housing market. At this point, however, it is still rather early to draw definite conclusions about this.

The Bank of England and the Monetary Policy Balancing Act

One of the Bank of England’s responsibilities is to try to ensure that the UK experiences steady economic growth. Specifically, the Bank of England Monetary Policy Committee aims to ensure that the UK experiences continual inflation of exactly 2%, neither more nor less. Of course, even Olympic archers miss the absolute centre of the target some of the time and hence it is considered acceptable for inflation to be between 1% and 3%, if, however, it is any lower or higher than this, then the governor of the Bank of England has to write an open letter to the Chancellor of the Exchequer to explain why this has happened and what the Bank of England proposes to do about it. Over recent years, a sluggish economy has seen interest rates kept very low. Because of this, there is a case for arguing that, realistically, there is only one way for interest rates to go and that is up. While this may be true over the very long term, it is entirely possible that the Bank of England will hold fast to its current low-interest-rate policy until there are very clear and consistent signs of growth in the UK economy.

Have You Got The Right Home Insurance Policy?

Even without the Euros, insurance arguably ranks well behind football in terms of fun topics of conversation; nevertheless, getting the right home insurance can make a big difference both to your peace of mind and your finances. Here are some helpful tips on making the right decision.

1. Consider buying buildings insurance and contents insurance from the same provider

Basically this will eliminate the possibility of two insurance companies bickering over who is responsible for paying out in the event of a claim, leaving you trapped in the middle.

2. Understand what is and isn’t covered

In terms of buildings insurance make sure you are clear on whether the potential pay-out is the rebuilding value of your home (the value of the bricks and mortar) or the purchase price of your home. There’s a good chance it’s the former, which means that if you base your cover on the latter, you could end up paying a whole lot more than you need to for cover which is much less than you think it is. In terms of contents insurance, in addition to the overall level of cover, pay particular attention to any exemptions, limitations or specific requirements for particular items, typically ones which are very much targeted by thieves. Common examples of these include certain electronics (such as mobile phones), jewellery, money and bicycles. In some cases it may actually be worthwhile excluding these items from your home insurance and getting specialist insurance instead. For example, you could exclude bicycles from your main home insurance and get a specialist policy which covers you for theft from inside and outside the home, plus public liability in the event that you have an accident. You also need to be clear on where you stand with regards to items kept in outbuildings such as garages and sheds.

3. See if you can reduce the cost of your home insurance by improving security in your home

Insurers are likely to demand home-owners guarantee a certain level of security as a condition of their cover. For example this could include having a certain standard of locks on doors and windows. You may, however be able to reduce the cost of your cover by taking additional measures such as installing a proper home safe. Even if this does not reduce the cost of your cover, it may still be the best place for irreplaceable items such as jewellery with sentimental value.

4. Be clear on the type of cover offered

There are basically two types of contents cover. New-for-old cover is essentially what it says. If an item is damaged, it will be replaced with an equivalent item (or the cash value thereof). With indemnity cover, you are compensated for the estimated value of the item at the time it was damaged (or destroyed). This takes depreciation into account and therefore may not be nearly enough to purchase an equivalent item new.

5. If you do any work from home make sure you’re covered for it

Insurance companies have long since caught onto the idea that these days many people have some sort of home office, even if it’s just for managing the household finances and perhaps doing a bit of work from home now and again. If, however, you are doing anything more than that, then it is strongly recommended to check where this leaves you in terms of your policy. In particular, if you are actually running a business from home, then, as a minimum, your insurers will probably want to know about it. If your business essentially involves you working alone at a computer then it is unlikely to make much of a difference to your premiums, but if you are using expensive and/or specialist equipment and/or receiving clients or other visitors, then it is very likely to have an impact as insurers will probably perceive it as a higher risk.

6 Really Obvious Ways To Save Money

We hate to be the ones to say it, but now probably really is a good time to start watching your pennies in readiness for Christmas. We know it’s in December but for those who are paid monthly it’s 4 or 5 pay packets away (depending on exactly when you get paid). Looked at from that perspective, it makes sense to start saving now, even though (hopefully) it’ll be some time before the carols start playing. To help you get started, here are 6 really obvious ways to save money.

Cull regular expenses you only use occasionally (or never).

Gym memberships are the obvious example of this. While pay-as-you-go rates can work out more expensive for those who go to the gym several times a week, for those who go less often, they can actually work out cheaper, plus there are lots of other ways to exercise both indoors and outdoors, without the need to pay regular fees – even for those who live in shared accommodation and studios. Subscriptions are another category to check, magazines, online entertainment sites, food parcels, if you’re not getting full use out of them, then unsubscribe.

Eat more home-cooked food

Eating out can be fun, but meals out, take-aways and ready-meals all cost more than food prepared at home. Even buying ready-to-use ingredients such as jars of pasta sauce generally costs more than buying the ingredients and making them yourself. We appreciate that if you don’t like cooking it can be a chore to come in tired after work and then have to make yourself something for dinner and then prepare a packed lunch for the next day (or do it in the morning when you’d rather be in bed) but you can break yourself in gently. Even if you start by only cooking at the weekends, freezing a couple of portions and making one packed lunch for Monday, you’ll still be starting to save the pennies and as you get better at cooking and managing shopping, you may find you can do more than you thought.

Learn to ignore food packaging and to look at ingredients instead

Premium food brands with high-quality, attractive packaging may indeed be worth the extra money – or they may not. A look at the ingredients should give you a good idea as to whether or not the higher price is justified. For basic items you may well find that supermarket own brands and such like are every bit as good as their more expensive counterparts.

Use up what you have before you buy the same or a similar item

If you have a drawer full of T-shirts, you don’t actually need any more no matter how good they look or what a good price they are. If you’re a (paper) notebook lover and you already have a stack of them, you don’t need any more, even if they’re on special offer. Basically if you already have a stock of something, whatever it is, use it up first before you buy any more.

Be suspicious of special offers

Some special offers can be very good value, but some simply tempt us to spend money on items we would otherwise have ignored. It doesn’t matter how cheap something is or what a good discount it is, if you don’t really want it and won’t actually use it or are only using it because you’ve bought it, then it’s probably a waste of money.

Learn to love pre-loved

New may be nice but pre-loved can be much more prudent financially speaking. In particular, if you know you don’t actually need to very latest model of phone/tablet/other consumer electronics item, then you can potentially make meaningful savings by going for a refurbished “last generation” item.

10 Minute Review Of Our Economy

At this point in time, the economy seems to be dominated by one word “Brexit”. While the whole country is waiting to see what exactly will happen when, it’s difficult to make any sort of predictions for the future, so instead we’re focussing on the present with our 10-minute guide to the economy.

The housing market

A mortgage is a long-term commitment and as such both the lender and the borrower need to feel confident that the latter will be able to keep up with the repayments over the long term. Jitters over potential job losses, particularly in the banking sector and fears that falling demand (due to reduced immigration and/or the repatriation of current immigrants) are unhelpful for the mortgage market and therefore unhelpful for the housing market.

The financial sector

For better or for worse the FIRE (Finance, Insurance and Real Estate) sector plays a key role in the UK economy. At the moment, it is an open question whether or not the financial services sector will hold on to its coveted passports, which enable them to sell their products and services throughout the entirety of the common market. It is also an open question as to whether or not they will continue to be able to process transactions in Euro from the UK. Some banks, such as Lloyds, have already announced job losses in the UK, although it is unclear whether or not this is directly (or even indirectly) connected to the issues surrounding the Brexit. Online banking and the move to digital payment methods (such as Visa, MasterCard and PayPal) has reduced the need for customers to visit branches, while demographic movements can see formerly busy branches losing customers to other locations.

The Bank of England (interest rates).

The Bank of England has made it clear that it will do everything it can to keep the good ship UK PLC on a steady course, even if it is through uncharted waters. The BoE essentially has two key weapons at its disposal, the option of making low-priced (or even free) credit available to banks (which, in theory should be passed on to businesses and other consumers) and interest rates. Its challenge is to provide enough stimulus to keep the economy moving without providing so much that investors get nervous about the state of the UK economy, which could lead to the UK having its credit rating downgraded, thereby making it more expensive for the UK itself to service debt. At the moment, the BoE is essentially feeling its way through a new situation along with everyone else and only time will tell how well it will manage its task.

The retail sector

The big news in the retail sector has arguably been the demise of BHS, however given the history behind that company’s woes it would be very difficult to pin this on Brexit. Likewise Marks and Spencer’s clothing arm saw dismal sales in the first quarter of 2016, prior to the result of the referendum and it remains to be seen how well Marks and Spencer will address the issues which led to this. The issue facing the retail sector is, of course, that it relies on consumers spending money, which means that it relies on consumers having money to spend. If consumers are uncertain about their job prospects, then it is entirely possible that they will rein in their spending, which, of course, hits retailers who specialise (or generate significant income) from discretionary purchases. For this reason, any weakness in the pound is bad news for companies which rely on imported goods (or on imported materials to make goods at home) as this increases the effective price, which means that vendors have a choice between cutting into their own margins (if they have room to do so) or passing the cost onto consumers and accepting that this may make them less attractive.

4 Things To Know About Interest Rates

Although it may not seem like it at first, interest rates really are interesting. High rates are great news for savers but bad news for borrowers and vice versa. Regardless of whether you’re a saver or a borrower, it’s important to understand 4 key points about interest rates.

For savers interest rates are in a race against inflation

Life is often a balancing act between conflicting goals and possibilities. In financial terms, this generally boils down to risk versus reward and/or cost versus benefit. Higher-risk investments can offer the possibility of great returns but, pretty much by definition, there is also the possibility of losing your initial investment. Cash savings can be viewed as safe in the sense that there is a relatively low risk of the saver losing their deposit, but if inflation (the cost of living) outpaces interest rates (the return on investment), savers can find their nest egg losing its value in real terms. This can be particularly challenging for older people on fixed incomes (pensioners) who do not necessarily have the long-term investment horizon of the younger generation but who do have a need for a reliable source of income to maintain themselves.

The interest rates available to consumers may be completely different to central-bank rates

About once a month, the press reports on the activities of the Monetary Policy Committee of the Bank of England, which sets the Bank of England’s interest rates. These are the rates charged (or paid) to banks which borrow from or deposit with the Bank of England. These rates may then feed through into consumer products such as savings accounts, mortgages and credit cards, some of which track this base rate. Some products, however, are fixed-rate and hence are unaffected any changes to the interest rates set by the Bank of England for the life of the fixed-rate deal. The key point to understand is that the interest rates offered to consumers are influenced by a number of factors as well as the base rate. Some of these are generic, such as what the banks think of the economy in general. Some, however, are specific to each individual, such as their credit history. Then, of course, there is the simple fact that banks need to pay their own bills and make a profit for their shareholders.

The same product can have different interest rates, applied in different ways

Credit cards in particular can charge different interest rates for purchases and cash advances (this is in addition to any fees they charge on cash withdrawals). In addition to this, the interest levied on purchases may be applied after a grace period, whereas the interest levied on cash withdrawals may be applied straight away, even if it is only actually charged when the monthly statement is created. If you would like to check this then it should be make clear in your terms and conditions, although you may find it easier just to send a message to your lender’s customer-service team to put the question to them directly.

Interest can be simple or compound

With simple interest, the interest payments are calculated purely on the basis of the initial sum deposited or lent. So, for example, if you deposit £100 then the interest you receive will always be based on that initial £100. With compound interest, however, interest is calculated on a rolling basis. Hence for example, if, after the first year you had received a total of £10 in interest payments, your next year’s interest payment would be calculated on the whole £110 rather than just the £100 you initially deposited. This is great news for savers but, of course, terrible news for borrowers and is part of the reason why those who take out high-interest credit can wind up paying more in interest than they borrowed to begin with.

Saving for big occasions

Little things can mean a lot but big events can cost a lot. Hopefully you will either be planning them well in advance or have a lot of notice of them, so that you have time to get your finances in order with the help of our useful saving tips.

1. Start by making a budget

When you’re working out how much money you’re going to need, think about what is absolutely essential for your event, what is a nice to have (and how important it is to you) and what you can live without. The essentials are what you’re absolutely going to need to finance. The optionals will depend on how your saving goes.

2. Look at the state of your finances at the moment

Hopefully you’ll already have money left over at the end of each month, in which case you will need to decide how much of it to reallocate to saving towards this, specific event. If it’s not enough, or, if you’re not generating a cash surplus each month, then you will need to look at how you can make savings elsewhere. This means you need to know where your cash is going at the moment. Your bank statements will be a good place to start. Counter-intuitive as this may sound, start by looking at the small transactions; these are the likeliest candidates for (relatively) painless trimming. You may, however, find that your bank statements are too generic to be very helpful. For example, you may see that you spent money at a supermarket, but not actually remember what you bought. In that case, you need to start looking more closely at your receipts to see how much of your spending was actually essential and how much of it can be trimmed if need be. If this still isn’t enough then you’re going to have to look at ways of raising more money. Depending on how much is required and the nature of the event this could mean anything from selling your old stuff to asking for sponsorship to asking family and friends to contribute to the cost of your event.

3. Find a place where your money can make more money

Storing your pennies in a piggy bank will keep them near to hand, but you’ll make more money putting your savings to work in some way. Again, what you can do with your savings pot will depend on various factors, in particular how much time you have to grow your savings and whether or not you’ll need access to your money at short notice in the run-up to it. For events up to a year away, realistically speaking, some sort of instant-access, interest-bearing savings account is likely to be the only feasible option. If you’re working to a longer time frame then you may like to look at bonds or even investing in the stock market.

4. Try to save first and spend what’s left over

Aim to pay yourself first. Put away the necessary amount (or even a bit more) into your chosen savings vehicle; then use the remaining money as your budget for the month. By removing the money from your current account, you can encourage yourself to see it as “gone” and to work with the money you have remaining. If you aim to save a bit more than you actually need, then you always have the option of dipping into your savings if you absolutely have to. If you find yourself needing to dip into the money you have saved for your event’s essentials then it may be time to ask yourself if you need to rework your plans either to lower the cost of your event or to give yourself more time to save up for it.

Brexit & Social Housing

The impact of Brexit on the housing market combines two of the UK’s favourite topics of conversation. Only time will tell what impact, if any, there will actually be, but we think it’s still worth taking a look at how the UK’s withdrawal from the EU could impact the property market. All housing statistics are from the House of Commons Briefing Paper 04737, published on 29th March 2016.

Social housing

Social housing is often a highly desirable option for those on lower incomes, offering both affordability and security. Between April 2014 and March 2015, only 9% of social lettings in England were made to those born overseas (including non-EU citizens). As of Q1 2015, 18% of those born outside the UK were social-housing tenants, compared with 17% of those born within the UK. While the levels of participation are similar, the fact that the number of people born overseas is much smaller means that any potential exodus of EU migrants is likely to have a much more limited impact on the availability of social-housing stock.

The private rental market

In the first quarter of 2015, 39% of all those born overseas were renting privately. Almost three quarters of the migrants who had arrived in the UK within the 5 years prior to the study, were in the private rental sector. While this obviously implies that any potential mass departure of EU citizens would have a much greater effect on the private rental market than it would on social housing, the fact that EU migrants form a relatively small segment of the population as a whole would limit the impact of their absence.

It’s also worth noting that the term “the private rental market” covers everything from budget accommodation for low-income workers to luxury family homes and is spread across the UK. It’s therefore a reasonable assumption that the areas with the highest proportion of EU migrants will feel the most impact of any significant outflow. Precisely what this impact would be is still very much an open question. In theory, falling demand should lead to lower rents for tenants and therefore lower yields for landlords. In practice, if landlords are relying on rents to cover a BTL mortgage, then they may decide (or be forced) to play safe and sell their property. This would reduce the availability of rental property, thereby making it more likely that remaining landlords could charge higher rents and thereby obtain higher yields, but it would increase the supply of housing stock for sale, hence potentially lowering prices.

Private home ownership

At Q1 2015, 43% of UK residents born overseas owned their own home (as compared to 68% of the UK-born population). Given that buying a home is a substantially more complicated process than everyday shopping, it indicates a level of commitment to staying in one place for more than a short time. It also indicates that an individual either has the funds to buy a home without a mortgage or the necessary income (and security of income) to get a mortgage. Hence it is a feasible assumption that EU citizens who own their own homes could be in a reasonably strong position if they wished to stay but needed to apply for a visa/work permit. In an extreme case, however, where there was a mass departure of EU nationals (voluntarily or otherwise) then their previous homes would presumably be absorbed either into the supply of property for sale or into the supply of property for rent. According to the law of supply and demand, increased supply should lead to reduced prices, which could be good news for first-time buyers and those looking to move into larger properties, except that lower prices may not necessarily translate into increased affordability. Cash buyers may be able to grab bargains, but those dependent on mortgages may find lenders insisting on even more substantial deposits and on compelling evidence that the potential buyer’s situation is stable enough for them to make payments over the long term, even if interest rates go up.
The impact of Brexit on the housing market combines two of the UK’s favourite topics of conversation. Only time will tell what impact, if any, there will actually be, but we think it’s still worth taking a look at how the UK’s withdrawal from the EU could impact the property market. All housing statistics are from the House of Commons Briefing Paper 04737, published on 29th March 2016.

Social housing

Social housing is often a highly desirable option for those on lower incomes, offering both affordability and security. Between April 2014 and March 2015, only 9% of social lettings in England were made to those born overseas (including non-EU citizens). As of Q1 2015, 18% of those born outside the UK were social-housing tenants, compared with 17% of those born within the UK. While the levels of participation are similar, the fact that the number of people born overseas is much smaller means that any potential exodus of EU migrants is likely to have a much more limited impact on the availability of social-housing stock.

The private rental market

In the first quarter of 2015, 39% of all those born overseas were renting privately. Almost three quarters of the migrants who had arrived in the UK within the 5 years prior to the study, were in the private rental sector. While this obviously implies that any potential mass departure of EU citizens would have a much greater effect on the private rental market than it would on social housing, the fact that EU migrants form a relatively small segment of the population as a whole would limit the impact of their absence.

It’s also worth noting that the term “the private rental market” covers everything from budget accommodation for low-income workers to luxury family homes and is spread across the UK. It’s therefore a reasonable assumption that the areas with the highest proportion of EU migrants will feel the most impact of any significant outflow. Precisely what this impact would be is still very much an open question. In theory, falling demand should lead to lower rents for tenants and therefore lower yields for landlords. In practice, if landlords are relying on rents to cover a BTL mortgage, then they may decide (or be forced) to play safe and sell their property. This would reduce the availability of rental property, thereby making it more likely that remaining landlords could charge higher rents and thereby obtain higher yields, but it would increase the supply of housing stock for sale, hence potentially lowering prices.

Private home ownership

At Q1 2015, 43% of UK residents born overseas owned their own home (as compared to 68% of the UK-born population). Given that buying a home is a substantially more complicated process than everyday shopping, it indicates a level of commitment to staying in one place for more than a short time. It also indicates that an individual either has the funds to buy a home without a mortgage or the necessary income (and security of income) to get a mortgage. Hence it is a feasible assumption that EU citizens who own their own homes could be in a reasonably strong position if they wished to stay but needed to apply for a visa/work permit. In an extreme case, however, where there was a mass departure of EU nationals (voluntarily or otherwise) then their previous homes would presumably be absorbed either into the supply of property for sale or into the supply of property for rent. According to the law of supply and demand, increased supply should lead to reduced prices, which could be good news for first-time buyers and those looking to move into larger properties, except that lower prices may not necessarily translate into increased affordability. Cash buyers may be able to grab bargains, but those dependent on mortgages may find lenders insisting on even more substantial deposits and on compelling evidence that the potential buyer’s situation is stable enough for them to make payments over the long term, even if interest rates go up.