After 44 years as a member of the European Union, Britain is officially leaving the European Union after triggering Article 50 on March 29th 2017.
As Brexit unfolds there will be much uncertainty about what will happen. Naturally, one of the biggest concerns for many of us is how Brexit might affect our personal finances.
With the imminent negotiations taking up to two years, we take a look at the current and future effect on the pound, house prices and interest rates.
Since the Brexit result, the pound has dropped by 12 per cent against the euro and 18 per cent against the dollar*.
This can have a wider effect on our general finances, but the direct result that you may notice is a lower return on your holiday money when you go abroad this year.
If you have a holiday booked, then you can help yourself get the most from your money by:
- Ensuring you buy your holiday money in advance – NEVER leave it until you get to the airport as their rates can be terrible
- Compare best rates using a travel money comparison tool, like MoneySavingExpert’s TravelMoneyMax
- Buy more for a better rate. Some bureaus reserve their best deals for people exchanging larger amounts of money in one go. The Post Office have preferable rates for those exchanging over £400 in one go, for example.
According to the Halifax, house price inflation has declined by 3.8 per cent in the last year**.
We should bear in mind, however, that even with the reported slowdown prices are still increasing at a steady rate.
According to the Nationwide House Price Index, the average cost of a house today is £206,665 – that’s still £31,111 more than it was 10 years ago.
In London, the average house price has reached £478,782, that’s £197,787 more than 10 years ago.
The UK interest rate – known as the base rate – was reduced by the Bank of England to 0.25% last year, following the shock Brexit referendum result.
The base rate can affect the interest we pay on loans and mortgages, and what is paid to us on our savings.
Whilst there is no immediate indication at the moment that the base rate will be raised, there is a chance that inflation could put force the Bank of England to raise rates in the months or years to come.
According to the Telegraph, inflation reached 1.8% in January 2017 – a two and a half year high – as food and fuel prices pushed up the cost of living. And thanks to the weaker pound, the bank has predicted inflation to rise close to 3% later this year***.
*The Independent 14/02/17
**Mortgage Strategy 07/04/17