Ageism in the property marketPosted on: 03 July 2014 by 50connect editorial
Steve Wanless says that ageism is alive and well in the residential mortgage market, but but-to-let invest do not face the same scrutiny.
England’s World Cup flop has consequences way beyond the futures of manager Roy Hodgson and captain Steven Gerrard. Sport has always been an emotional roller-coaster; that’s part of its attraction. Whether it’s your local village, town, city or national team, there are vast numbers that live and breathe its every success and failure.
Much of the hurt at being a sideshow in a world sporting event comes from the fact that these islands invented most of the great sports. Especially the team games of football, rugby and cricket, in the first place and then gave them to the rest of the world so they could beat us!
Pundits may claim the Barclays Premiership is the best football league in the world – and the financial figures suggest they may be right. Yet it’s decades since the national team was a force on the world stage.
There should have been no shock at such an early, uneventful exit on this Brazil adventure. Yet, as ever, hopes were high. Now it is being stated that Louis Suarez’ two goals against England has cost the economy £1.3 billion!
Mind you, those figures were worked out on England getting to the final – hardly the basis on which any sensible or prudent financial plan would be put together. Even a slight fall on the stock market the next day was blamed on the defeat to Italy; every major soccer nation will see their markets drop by 0.5% the day after elimination.
Such is the power of sport, television, new media and technology, especially in the way everything seems earth-shattering one day – and hardly rates a mention the next.
The financial world appears no different, which is rather more worrying. As a general rule, if there’s a great deal, or money-making trend and it’s highlighted in the media, then it’s almost certain the boat has sailed as far as joining the bonanza is concerned.
The pension revolution and the scrapping of the requirement to purchase an annuity were announced in the March budget – and will come into force next April, by which time all the rules and regulations will be formulated.
No more free advice ... just guidance
Part of the Chancellor’s statement emphasised that everyone reaching pensionable age with a pot would receive “free” advice about how to make the best choice. Three months down the line, there is still no accurate information about who or where this “free” advice is coming from – in fact, it is no longer “advice” – the official wording has changed to “guidance”!
There will be devil in the pension detail, but those approaching pensionable age should not be sitting on their hands until next April.
It’s certainly worth a visit now to your Independent Financial Adviser (IFA) to discuss your pension thoughts and plans. The basic outline of what George Osborne announced will not change; if he tries to wriggle out of the basic benefits of his brave new pension world, the Coalition, and more especially the Conservatives, could kiss goodbye to any thoughts of winning next May’s General Election.
Brave new world for pensions
There is no longer term financial plan undertaken that saving for a pension; your pot goes up and down, reflecting the economic situation. Hopefully, at the end of 25, 30 or 40 years, you get the benefit of steady investment. You have little option other than to hold your nerve through the bad times.
The Budget announcement and the necessary requirement for a Parliamentary Bill to confirm the pension changes, allows valuable thinking and consultation time for those approaching retirement. It shouldn’t be wasted. Your IFA will help make sure you are prepared and have considered all the options.
One of those options may include using your pension tax-free lump sum to get onto the “buy-to-let” property ladder, even though the requirement to buy an annuity eventually appears to have gone.
“Buy-to-let” mortgages are outside the scope of the Mortgage Market Review (MMR), which finally came into full force at the end of April. Therefore, borrowers do not come under the same scrutiny of “affordability” as residential customers.
Ageism is alive and well in residential mortgages. Many lenders have reduced their age limits by which time loans will be granted or must be repaid, despite the fact that in many cases pension income is guaranteed until death and not subject to the vagaries of the job-market place.
Cost is not just the price of the property
The Mortgage Works, part of the Nationwide Building Society, recently scrapped the maximum age limit (which was 90) on its buy-to-let products – the only restriction now is that you must apply for the loan by the age of 70.
But the “buy-to-let” market is not for everyone, especially first-timers of a pensionable age.
Your IFA will demonstrate that the cost of property purchase is not restricted to the purchase price. As well as legal fees, searches and stamp duty, there are on-going costs, which can dramatically increase if the property is not let for a period. It’s a crucial part of the IFA’s role in highlighting the “downside” of financial proposals.
As every pub and club owner is now aware, there is always a “downside”, even when promoting sporting events. The lure of £200m being spent by supporters every time England score a goal is more than tempered by fear of an early exit after only two matches and national doom-and-gloom.
There is an “upside” because Brazil 2014 is the most exciting World Cup for years, with great matches and late goals. Very few have stopped watching the tournament because of England’s demise and there will be fewer “sick” notes over the next fortnight.
It’s not just this country’s economy that has much riding on the World Cup. Sportswear giants Puma, Nike and Adidas are all battling for top spot. Puma has already lost Italy and the Ivory Coast, but has Chile and Uruguay carrying on. Nike has hosts Brazil and in-form Holland, but England and Croatia are on their way home.
Adidas, despite losing holders Spain, are well placed with Argentina, Colombia and Germany, as well as Mexico. Yet, an outsider could steal the show – Swiss-based Burrda (Belgium) or Lotto (Costa Rica).
The marketing men are always looking at numbers. The dream final for many is Brazil v Argentina or Neymar v Messi, both of whom have already lived up to their superstar billing in this World Cup with cracking goals. But the individual battle between Adidas and Nike goes to neither.
Messi (Adidas) has nearly two million followers on Twitter – but that number is dwarfed by the 26.6m who follow Ronaldo, of Portugal and Nike, a clear winner whether Portugal make it to the later stages or not.
There are always winners and losers, sometimes winners and winners, and, sadly, occasionally, losers and losers.
The Budget’s pension changes have been greeted, generally with cheers, but that doesn’t mean everyone is going to be a winner. Newspapers are full of sad stories of financial scams and unscrupulous companies and individuals who will loot a lifetime’s saving in the blink of an eye, without a backward glance.
That’s why the Chancellor made his “free advice” now “guidance” - offer – but do yourself a favour if you are approaching retirement. Don’t wait; see your IFA now to discuss your options. If you haven’t got one, do yourself another favour - go to someone who is trusted, respected and probably been in business a long time.
The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage.
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