Last week the UK voted to leave the EU. Whatever your views on Brexit, itās clear that weāre set for a period of uncertainty when it comes to our personal finances.
Weāve set out the main ways that the vote to leave the EU might affect your wallet, but itās clear that definitive answers about what will happen may be hard to come by, at least in the short term.
Brexit and interest rates
Savers face uncertain times when it comes to their interest rates. The Bank of England (BoE) base rate has been stuck at a record low 0.5% since 2008, in order to encourage banks to lend and boost the economy. Now, with fears about a possible recession, the Bank may cut the rate to 0.25% or even 0%.
The Governor of the BoE, Mark Carney, stated in his speech on the morning after the referendum that the Bank would consider āany additional policy responsesā. Itās thought that the first rate cut may happen in August, but this is purely speculation.
The logic of lower interest rates is to make it cheaper to borrow money, which in turn will make people more likely to spend, boosting the economy. This would mean more bad news for savers, but better news for homeowners and those in the market for a mortgage.
Beyond the immediate term, itās possible that interest rates could start to rise, especially if inflation becomes a concern. Itās thought that inflation may become a problem as the result of a weaker British pound, which could lead to increased prices from the supermarket to the petrol pump.
Uncertain times for investors
Investors, including anyone with a pension invested in the stock market, face a period of uncertainty. And since stock markets hate uncertainty, investors should expect big swings in prices over the coming months.
The FTSE 100 index, which is made up of large, often multi-national companies with earnings around the world, fell substantially in the immediate aftermath of the referendum vote, although it has since bounced back to an extent. The FTSE 250, which is made up of mostly medium-sized and domestically-focused companies, fell more dramatically. At the time of writing the FTSE 250 has also recovered some ground, but is still down by more than 10% since the start of 2016.
However, long term investors with balanced portfolios should be well placed to ride out the storm. And if interest rates are cut you would usually expect shares to go up, all else being equal, as frustrated cash investors seek better returns from riskier assets. The Chancellor George Osborne, following Mark Carneyās lead, has sought to reassure the markets about the strength of the UK economy.
Homeowners post EU referendum
And homeowners may face a less rosy outlook than theyāve become accustomed to, with speculation about the impact the wider economic climate might have on the property market. Itās possible that the market will slow down, as buyers decide to wait and see what happens to asking prices. On the other hand, lower mortgage rates could stimulate demand.
Your Brexit concerns
Which? is committed to helping you with the difficult questions you might face following the UKās vote to leave the EU. And as negotiations to leave the EU develop, we will work with the government to ensure that the consumer voice is heard and important rights are protected.
Our Which? Money Helpline experts have fielded some Brexit questions since the result of last weekās EU referendum. Some callers have been concerned about their pensions; others wanted to find out whether their savings were safe. Weāve also heard from concerned homebuyers.
Weāll be covering all these issues in Which? Money magazine and on Which.co.uk in the coming weeks and months. We also want to hear what youāre most concerned about here on Which? Conversation.
Will you be making any changes to your personal finances following the EU referendum results? Are there any consumer issues related to Brexit that are worrying you, whether personal finance or not?
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