What has happened over the last few weeks in personal finance? (23/06/2020)

Category: News

Probate – things you should know

With the coronavirus causing long delays to the process, here are the key points to remember:

  1. Find the will

Once somebody’s death has been registered, the first thing to do is locate the person’s will. If you cannot find it, contact the person’s solicitor, accountant, or bank to see if any of them holds it.

  1. Contact banks and other financial providers

The executors named in the will should start assembling the financial information. If there is no will (called intestacy) the people who will inherit should do this. You should notify banks, building societies, mortgage lenders, credit card providers and insurance companies. Your first step should be This allows you to notify several banks and building societies of a person’s death at the same time. Then go to the Tell Us Once service, which lets you report a death to most government organisations at once.

  1. Estimate and report the estate’s value

The executor needs to assess the amount in pensions, savings, and investments. They also need to work out if the dead person’s employer owed them wages. Debts such as credit cards must be paid off. The mortgage lender may stipulate that interest payments should continue while you are applying for probate. If this is the case, the executor can pay these bills and reclaim the money from the estate once they have obtained probate.

  1. Begin the formal probate process

The executor should apply for a grant of probate. This is the legal document that enables you to access funds, sort finances and share out assets the deceased accumulated. The government website sets out the process and whether you have to go through it.

  1. Decide whether to use a solicitor, probate brokerage or do it yourself

You are under no obligation to use a solicitor. If you do, do not automatically sign up with the family firm, or the bank. Their charges can be high. Most firms operate hourly rates or percentage charging systems.

Buy-to-let challenges

Brexit uncertainty impacts on house prices, COVID-19 global recession, new changes on HMO licensing. It is a tricky time to be a landlord. The buy-to-rent market has become increasingly tough for landlords over the past few years but 2020 has exacerbated things. Industry experts have warned that the new changes could push things harder for landlords. They have said it could come to the point of making some leave the sector. But what impact will these changes have on the buy-to-let landlords?

  1. COVID-19 and House Prices

Britons have become accustomed to expecting rising prices. After all, house prices have increased five folds since 1950, faster than any other OECD country. But things are set to change. In 2020, buying and selling will all but stop. As a matter of fact, it has indeed stopped. In April alone, Zoopla reported a 40% drop in inquiries. The product choice for borrowers will plummet. This could result in rising interest rates which will be a blow to landlords considering investing in rental property

  1. Changes to Private Residence Relief

A revision of the property residence rules and regulations will introduce a high capital gain tax that will hit landlords hard when they sell their property. Before April 2020, you were entitled to up to £40,000 in capital gains tax relief if you let a property that you have been living in. This rule has now been scrapped. Landlords will need to be living in the property in shared occupancy with the tenant to qualify for this relief.

  1. Stamp Duty

Since 2016, landlords have had to pay a 3% stamp duty on every buy-to-let property they invest in. The government is looking to extend the tax to cover a wider scope of the property market.

  1. Energy Efficiency Rules

Since April 2018, landlords have been required to achieve an energy efficiency rating of at least E for all new tenancies and tenancy renewals. Now, all rented properties need to meet a minimum energy efficiency rating of E.

  1. HMO Licensing & Planning

Anyone buying a property with solely to create a house in Multiple Occupation (HMO) will need to abide by the new HMO directives. Under the previous rules, landlords could turn a home into a small HMO with up to six occupants with no additional licensing.

Avoid mini-bond scams

The City watchdog has permanently banned the marketing of mini-bonds. This is after thousands of savers lost hundreds of millions of pounds in a string of scandals.

The speculative investments allow unregulated companies to raise money directly from ordinary investors. Their marketing was temporarily banned in January. This was almost a year after mini-bond firm London Capital & Finance collapsed with £237m of savers’ money.

That ban will now become permanent, the Financial Conduct Authority announced on Thursday. Campaigners have warned holes in the law and weak enforcement by regulators meant consumers were still at high risk of being targeted by fraudsters.

There is no legal definition of what a mini-bond is in the UK. Most companies that have offered them,  borrow money from ordinary savers. They promise them a fixed return well above the rate available on most standard saving products. The mini-bond firm is then largely free to do what it wants with the money. Many have lent investors’ cash to third party companies (which sometimes has the same directors), bought other risky investments such as racehorses or wine, or funded property construction.

A number of companies that raised money in this way have collapsed with millions of pounds of savers’ money unaccounted for. The FCA claims that mini-bonds are not within its remit, while criminal investigations for fraud are rare and prosecutions even rarer. As a result, investors generally have no protection if things go wrong, and fraudsters can operate with little fear that they will be punished.

Credit payment holidays extended

Hard-up credit card and personal loan borrowers will be able to put their repayments on ice for another three months, the Financial Conduct Authority has confirmed.

However, the city watchdog said that those who could afford to make reduced payments should do so. Borrowers who have yet to take a payment freeze, along with those who had not yet applied for a £500 interest-free overdraft with their bank, have until the end of October to ask for one.

The announcement is in line with moves made to extend mortgage holidays for another three months, announced at the end of May. The FCA previously brought in the rules for overdraft, credit card and personal loan borrowers in April, with three-month payment holidays taken by more than 1.65million people by the end of last month.

There was reportedly debate over providing another blanket three-month payment holiday to unsecured borrowers hit hard by the coronavirus crisis, due to the cost of rolling up interest, especially on credit cards. This is Money previously worked out that taking a three-month payment holiday on a credit card with an APR of 29.9 per cent and a £4,000 balance would see £270 interest added during the break. In its announcement, the FCA made it clear it wanted borrowers to make reduced payments where they could rather than simply put their payments on hold for a further three months.

New mortgage crunch

The UK’s second-biggest mortgage lender Nationwide has dramatically increased the deposit required by homebuyers to secure a loan. This is a move one academic said could lead to an overall reduction in homeownership.

The building society said it was increasing the deposit a buyer would need to ut down to 15%. It said it had taken the measure in the light of growing uncertainty over house prices. This means it had to reduce the loan-to-value ratio to ensure borrowers didn’t fall into negative equity.

Those with existing mortgages at higher loan-to-value ratios will continue to be able to borrow, it said. The news comes after Housing Today last month reported a 90% drop in the provision of 95% loan-to-value mortgages since the onset of lockdown. Since then, some housebuilders have claimed that lenders were beginning to relax from this view. The Nationwide’s announcement appears to contradict that position.

COVID hurts women more financially

Lockdown is easing. More employees are expected to return to work. There are, however, still no longer plans for all pupils to return to school before September.

For some observers, these are separate facts. For working parents, they are an intertwined nightmare. As history has repeatedly shown, what affects working parents usually disproportionately impacts working mothers.

Commentators fear that the unacknowledged inequality could have a catastrophic impact on women’s careers, finances and families. The full picture of the negative impact lockdown has had on women’s lives across all ages and sectors is now emerging. The effect is far-reaching. A report by CitiBank has found that of the 44 million expected redundancies worldwide, 31 million are women. That is more than double the 13 million men. Women are also more likely to be caring for an elderly relative, according to Carers UK.

Research by The Institute for Fiscal Studies (IFS) and University College London (UCL) revealed that women are more likely to bear the brunt of childcare responsibilities and homeschooling during lockdown. This is the case even in couples where both parents are working. They found mums were only able to do one hour of uninterrupted work for every three hours done by dads.

With more hours lost to childcare and more frequent interruptions, women’s careers are taking a much greater hit as well. Mothers are almost 50% more likely than fathers to have either lost their job or quit since the lockdown began, research by the IFS has shown. The Fawcett Society has warned that a gender blind approach to coronavirus policy and spending, risks “turning the clock back on gender equality”.

Warnings on equity release advice

The Financial Conduct Authority has sounded alarm bells over unsuitable equity release advice. The warning comes as the regulator said it would be carrying out a more detailed follow-up review of advice. The FCA said its work in the equity release market had uncovered mixed results. There were some cases where lifetime mortgages were working well and unlocking equity for consumers who could not afford traditional mortgages. But the watchdog also warned of significant areas of concern” where advice was not in the best interests of the consumer.

These include instances where advisers did not always take into account the personal circumstances of their clients.  The FCA also found the reasons behind consumers looking at equity release were not always challenged by firms. Also, advisers were not always able to evidence their recommendations were suitable. The review was undertaken by the regulator as part of its exploratory work on later life lending. It looked at the borrowing opportunities available to consumers aged 55 and over. Some of whom may be more vulnerable. Figures from the Equity Release Council found that homeowners accessed £1.06bn of property wealth through equity release in Q1 2020.

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