Finance in the News

Better value with equity release
Someone using an equity release loan today, and borrowing the average £70,000 against the value of a £310,000 property, would save £70,000 over 20 years compared with the cost of the same loan five years ago, says the Telegraph. This is the result of interest rates falling from an average of 5.9 per cent in 2012 to 3.9 per cent today. One lender reckons that as much as £3 billion will be drawn by equity release loans – also known as ‘lifetime mortgages’ – in 2017, a huge increase over the past decade.

House prices will soar
An economics professor who used to be on the Bank of England’s Monetary Policy Committee says house prices in the UK will keep on rising until they reach 15 times average income, says the Mail. The prediction is based on analysis of the effects of commuting. The professor says that if we invested in bullet trains that took 40 minutes to get from London to Somerset – in the same way the earlier generations invested in the London Underground and bus networks – that would even out house prices, but there has been far too little investment in transport in recent decades.

Move costs deter downsizers
The costs of moving are deterring older people from downsizing, says the Mail. Surveys show around 5.5 million older people would like to downsize if they could find a suitable property, but moving costs are a major obstacle. The move from an average 4-bed home (national average value £490,000) to a 2-bed one (average value £293,000) would typically cost £29,000 by the time stamp duty, lawyers’ fees and moving costs are included. Former Minister Baroness Altmann is among those calling for a stamp duty holiday for downsizers.

Cut in tax allowances confirmed
Cuts in allowances that were in this year’s Budget but were scrapped in the Finance Bill rushed through Parliament before the election will be reintroduced in a new legislation in November, says the Times. The most important is the cut in the dividend allowance from £5,000 to £2,000 a year, which is expected to result in 2.3 million investors paying more income tax. A basic rate taxpayer with £5,000 of dividends will pay £225 more tax each year. The amount people can save into pensions after they have taken all their tax-free cash will also drop from £10,000 to £4,000.

Waning interest in cash ISAs
The amount invested in cash Isas fell by £20 billion or almost a third in the year to April, says the Financial Times. The reason was falling interest rates, with many non-Isa accounts now paying more than equivalent Isa accounts. For the first time, the amount invested in Stock & Shares Isas at £22.3 billion was greater than the amount going into cash ISAs. The value of all investments in Stocks & Shares Isas is now £315 billion compared with £270 billion for Cash Isas.

Warnings on secret accounts
Millions of Britons have been warned about the dangers of holding secret bank accounts, says the Financial Times. Advisers and banks have told them about new schemes that give HMRC access to information from 100 other countries about assets held overseas. The letters also remind them about the penalties for not declaring overseas income or gains on assets held overseas. However, the amount HMRC estimated it would collect in tax after it gained data from the Channel Islands was cut from £1 billion in 2013 to £270 million in 2016, which experts said reflected the lack of resources HMRC had to investigate potential tax evasion.

Tax codes on the blink
A new PAYE coding system introduced by HMRC in July is resulting in ‘aggressive’ tax deductions, says the Financial Times. Experts point to flaws in the new ‘dynamic coding’ system, which is meant to alter tax codes in response to changes in income. The problem is that it generates large tax demands in response to big bonuses paid early in the tax year, while employees returning from foreign assignments do not get credit for foreign tax they have already paid.

‘No rate rise until 2019’
Despite inflation being above the Bank of England’s target – it was 2.6 per cent in July compared with the official target of 2 per cent – the Bank will not raise interest rates until 2019, says the BBC based on a poll of leading economists.