Latest news with #LaithKhalaf
The Sun
09-05-2025
- Business
- The Sun
What's next for mortgage rates and how low will rates go? Experts give their verdict
HOMEOWNERS and aspiring buyers may have breathed a sigh of relief after the Bank of England dropped interest rates yesterday. The base rate influences mortgage prices by reducing the overall cost of borrowing. 1 The Bank of England 's Monetary Policy Committee (MPC) voted on Thursday to drop the base rate by 0.25% from 4.5% to 4.25%. The cut was expected as the global economy responds to US president Donald Trump 's tariffs. Laith Khalaf, head of investment analysis at savings platform AJ Bell, said: 'Trump's tariffs have fed directly into this interest rate cut by pushing down energy prices, which has lowered the UK's inflation forecast." When interest rates are low the cost of borrowing tends to fall. Lenders were largely expecting the base rate cut this week and many acted in advance by trimming mortgage rates. In recent weeks, providers have been slashing rates below 4% and Halifax was among the big lenders to cut rates further this week. This helps those looking for fixed rate mortgages to get a better deal. Those on tracker and standard variable rate (SVR) mortgages typically see their rate and payments fall the following month after a base rate change. A 0.25% cut to base rates would mean an average SVR mortgage would fall by £170 a year, while those on tracker deals will see a £350 a year drop. We have rounded up the full list of lenders that have cut variable mortgages in response to the move by the Bank of England. But borrowers will be wondering whether costs could fall even lower this year. Here is what the experts say... Best schemes for first-time buyers How low will interest rates fall? The Bank is tasked with keeping inflation at around 2% and in part uses interest rates to do so - typically dropping rates when inflation is lower. The Bank now expects inflation to peak at 3.5% later this year, which is down from its previous forecast of 3.75%. Financial markets believe that interest rates could drop to 3.5% which would mean several more cuts to come and likely lead to lower mortgage rates. However, it is not a guarantee and will depend on how the global picture plays out. Laith Khalaf from AJ Bell said: 'Trump's tariffs have definitely led to falling fixed mortgage rates so far, but whether that continues to be the case depends on the final implementation, and the reaction of interest rate markets. "Lenders may also be looking at the economic picture, in particular the potential for unemployment to rise, and think this is no time to be heroic by slashing rates. "Unfortunately for mortgage borrowers, guessing the future direction of the mortgage market right now is like a high stakes game of blind man's buff." The Bank of England will react to events as they unfold and typically takes a 'gradual' approach to rate cutting rather than making sudden sharp moves. How long should you fix? Borrowers take out fixed rate mortgages for peace of mind over repayments in the future. But it's often tricky to decide whether to fix for a short term, such as two years, and hope rates are lower when the period ends. Or opt for five in expectation that rates will not be much different in two years or could even be higher. David Hollingworth, associate director at broker L&C Mortgages said: "Over time and as base rate continues to drop it should help to see fixed rates edge lower. "Two year fixed deals are now on par or even lower than the five-year products, which has not been the case in recent years. "That will only intensify the dilemma of how long is the right time to fix for. " However, the best thing to do is focus on your own individual circumstances. David adds: "Borrowers should keep their focus on what works for them – rates could be lower in a couple of years so a short term rate would offer the chance to review at that time but there's no guarantee at all and a longer term fix of five years or more would give greater security." Should you opt for a tracker? Fixed rates are more popular for homeowners as they give certainty over payments for a set period of time - regardless of any changes to interest rates over this time frame. But if you think the base rate is going to fall, you could take advantage with a tracker mortgage. Rates on these deals fall in line with the base rate - but beware as they will also rise if the base rate goes up. David from L&C says: "The margin between fixed and tracker deals should continue to narrow and trackers are far more likely to be free of any early repayment charges, giving borrowers more flexibility if they're not sure they want to lock in. "Overall, borrowers should hope to see an improving rate outlook but what we don't know is exactly how quickly those cuts may feed through. "Just as the news of trade tariffs and the ensuing turbulence quickly affected rate expectations, there could still be other events that will turn things around." It's not just about what you think will happen with interest rates. Tracker mortgages also depend on your circumstances - if you are looking for flexibility and don't want to tie into fixed deals which come with high exit fees, they can be a good option. Nicholas Mendes from broker John Charcol says: "Tracker mortgages can offer a compelling alternative for certain borrowers, particularly those who value flexibility or believe that the base rate is likely to fall further. "These products are linked directly to the Bank of England base rate, plus a set margin, meaning repayments adjust in line with any official changes." Different types of mortgages We break down all you need to know about mortgages and what categories they fall into. A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years. Your monthly repayments would remain the same for the whole deal period. There are a few different types of variable mortgages and, as the name suggests, the rates can change. A tracker mortgage sets your rate a certain percentage above or below an external benchmark. This is usually the Bank of England base rate or a bank may have its figure. If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced. A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one. SVRs are generally higher than other types of mortgage, so if you're on one then you're likely to be paying more than you need to. Variable rate mortgages often don't have exit fees while a fixed rate could do.
Telegraph
24-03-2025
- Business
- Telegraph
Where the experts are investing their Isa money
Where are you investing your Isa in the new tax year? Let us know at money@ As the Isa deadline rattles ever nearer, many of us will be considering where to put our capital to work. This can be an extremely daunting prospect. Markets are volatile, bonds have let us down and cash is only eroded by inflation. Indecision can be our biggest enemy when it comes to taking advantage of our Isas – the options are endless and we can find ourselves frozen in place year after year, letting our tax-free allowance go to waste. There are no shortage of investing experts giving their views on where you should put your Isa – but are they putting their own money where their mouths are? They reveal their strategies below: Helena Morrissey, former fund manager, City grandee and Telegraph Money columnist Last year I split my Isa allowance between broad-based US and UK equities; despite all the noise, the returns have been similar, but now I feel cautious about US large cap stocks for a few reasons. Tariffs aren't really one of them, given that the US economy is much more internal than ours. Just 14pc of US GDP relates to imports, and 11pc to exports, compared with the UK's 33pc and 31pc figures. But the US market has become extraordinarily concentrated, with few stocks outperforming the market over the past two years. So, this year I'm investing a third of my Isa in the Brown Advisory US Smaller Companies Fund to take advantage of the historically low valuations of these small companies (an actively managed fund is critical when navigating more volatile smaller firms). Another third will be invested in actively managed emerging market equities – the next big global growth story. I like the top-down approach taken by the managers of the JOHCM Global Emerging Market Opportunities Fund. My final third will be kept here in the UK, where I'll go for a FTSE 100 tracker fund. Labour has been disastrous for the British economy but the stock market is driven by many factors. I remain hopeful that the Government will overhaul the Isa regime to encourage an investing culture here, something we badly need. Laith Khalaf, head of investment analysis at stockbroker AJ Bell I'm still of the opinion that the UK looks good value despite plenty of hand wringing about the state of the London Stock Exchange. These things are cyclical, and sometimes there aren't many revolutions per minute, so patience is necessary. I like the Fidelity Special Values Trust because it's run by a long-standing contrarian manager who invests in companies of all sizes. I also want to lock into the long-term growth potential of smaller companies, so I'll probably top up existing holdings in Artemis UK Smaller Companies and Aberforth Smaller Companies Trust. I don't want to totally turn my back on the US and the global stock market, so I'll put some of my Isa into Fundsmith Equity, as I view Terry Smith as a safe pair of hands – his fund has been outperformed by the MSCI World Index in recent years, but to be honest, what hasn't? I may well leave up to half of my Isa money in the BlackRock Sterling Liquidity Premier Fund, a cash-like money market fund. The money parked in there will give me another bite at investing in the markets later this year. Nick Train, a fund manager running £13bn for investors As every year, I will invest my Isa into shares of Finsbury Growth & Income Trust, the trust I have managed for nearly 25 years. Three reasons: First, I feel an obligation to invest alongside other shareholders. It's right I should eat my own cooking. Next, investment trusts are great Isa vehicles – typically you access the underlying investments at a discount to market value. Last, Finsbury is invested in UK companies. Recent disenchantment with the London stock market has left the shares of many world-class UK companies trading at attractive valuations. We own a lot of them. I expect my growing holding will be a rewarding investment. Gavin Lumsden, freelance journalist and investment trust expert With US-led global stock markets looking wobbly, I'm picking two UK-focused investment companies. Share prices in the sector are in a slump so my first choice is Achilles Investment Company, a recently launched £56m activist fund targeting distressed infrastructure and real estate investment trusts. The management has a good track record in shaking up Hipgnosis Songs, a music royalty fund, and PRS Reit, a property fund. Its first target Urban Logistics, a fund investing in warehouses, shot up in value when Achilles disclosed a stake, so I have hopes of more to come. My second choice is Aurora UK Alpha, a £274m investment trust trading on a 10pc discount to asset value, offering a cheap way to access a continued recovery in the UK stock market. I like the in-depth research the fund managers do on their tight portfolio of undervalued stocks which include undertakers Dignity, Lloyds Bank and builder Barratt Redrow. Robert Stephens, equity analyst and Questor columnist Despite recent stock market turbulence, it is a case of business as usual regarding my Isa investing plans. Namely, all deposits into my Isa will be invested in shares, rather than being held as cash, due to their far superior long-term track record of performance. Indeed, beyond its use for emergencies and to provide peace of mind, cash offers relatively little investment potential in my view – and with interest rates widely expected to fall over the coming months, its appeal is likely to further deteriorate. As for what I plan to buy, the US stock market's recent slump makes it too tempting to ignore on a long-term view. In the past I've loved investing in individual stocks – and of course recommend them every week in Questor – but regulations at work have made that untenable today. Therefore, I am likely to add to my existing Isa holdings in the next best thing – S&P 500 tracker funds provided by Vanguard, iShares and HSBC. They offer broad exposure to the US economy and I have found them to be a simple, cost-effective means of diversifying my Isa. Certainly, the stock market could fall further in the short run, but as a long-term investor I am wholly unconcerned about how share prices perform over a matter of months. In fact, a falling stock market is likely to prompt me to buy more shares rather than retreat into cash.
Yahoo
25-02-2025
- Business
- Yahoo
Inflation and interest rates predictions: What it means for your money in 2025
Hopes of interest rates coming down quickly this year appear to be fading amid rising taxes and economic uncertainty in the UK. Inflation may no longer be at double digits and the cost of living measure even managed to hit the 2 per cent target last year, which prompted interest rate cuts in August and November. But despite an interest rate cut in February and the cost of borrowing figure now being at 4.5 per cent, there are concerns that inflation may now be heading the wrong way and further rate cuts could be pushed back. Inflation measures the cost of goods and services in the UK. This includes everything from your energy bills to your food shop. It is measured by the consumer prices index (CPI) and calculated by the Office for National Statistics (ONS), which revealed a figure of three per cent for January, up from 2.5 per cent in December. Laith Khalaf, head of investment analysis at AJ Bell, said: 'Inflation is now one per cent away from target and heading in the wrong direction, and consumers better buckle up for prices to trend higher throughout this year. 'The Bank of England reckons inflation will hit 3.7 per cent in the third quarter, and that's without a potential tariff shock stemming from US trade policy. The chancellor's decision to raise national insurance and the national living wage from April will no doubt feed into the inflationary dynamic.' Joe Nellis, an economic adviser at accountancy firm MHA, adds that increases in household utility bills will provide an even greater uplift on prices. He said: 'From April, the national average household water bill will increase by £123 a year to £603, a considerable uptick of 26 per cent, and the cap on energy bills is expected to rise in the same month.' Tuesday's announcement shows the cost for the average household being an additional £9.25 a month for energy. Craig Rickman, personal finance expert for interactive investor, added: 'The VAT hike on private school fees is already starting to bite, while the employer national insurance increase and national minimum wage rise are set to kick in from April. Many businesses have warned these additional costs will force them to raise prices.' With inflation remaining sticky, experts warn that the Bank of England may be more reluctant about further interest rate cuts. That is despite the Bank cutting interest rates in February. Rickman said the Bank of England's Monetary Policy Committee has plenty to consider when it next meets to set interest rates on 20 March. He said: 'The Bank has alternated between reductions and holds since it kickstarted the rate-cutting process in August 2024 and after voting to slash the bank rate a couple of weeks ago, it seems this trend will continue with a hold the most likely outcome next month.' Nicholas Hyett, investment manager at Wealth Club, added: 'Making matters worse is the substantial uptick in core inflation – which strips out food and energy prices and is considered a better measure of domestically generated inflation. With core inflation nearly twice the Bank of England's target we see little chance the Bank starts cutting rates again any time soon.' Khalaf said the markets are pricing in two further rate cuts this year, but added: 'There are risks to the market's view that rates will move lower throughout this year. At 5.9 per cent, pay growth is high and seems to be on a rising trend, which may be pumped up by the rise in the National Living Wage. 'A strong dollar and trade tariffs could also add to inflationary pressures.' For these reasons, Khalaf suggests cutting rates remains a risky move. He said: 'To cut rates in the coming months, the Bank of England would need to do so in the face of what it admits will be rising inflation. Of course, the Bank must look to the longer term when it comes to monetary policy, but cutting rates while inflation is heading in the wrong direction is still a pretty sticky wicket.' Higher inflation could mean interest rates remain at their relatively high levels. This would be a blow for anyone looking to buy a house or remortgage as mortgage lenders may be reluctant about cutting pricing or offering more competitive deals. Savers, who have benefited from rates being at 15-year highs, could continue to benefit although many of the best deals have been disappearing in recent months. There are still plenty of savings accounts offering above four per cent, however. Additionally, higher or rising inflation may eat into your returns. Dean Butler, managing director for retail direct at Standard Life, said: 'For borrowers and mortgage holders, the prospect of higher-for-longer interest rates will be frustrating. 'However, for savers, an extended period of elevated rates provides an opportunity. Easy-access cash savings deals at or just below five per cent remain available, but as inflation picks up it will more aggressively erode real returns. Shopping around for the best rates remains crucial.' As inflation races away from the UK's two per cent target, Rickman said it offers a timely reminder to investors and savers to make sure their money is working as hard for them as possible. He said: 'If inflation outpaces the return you receive, your wealth will erode in real terms. If not kept in check over long periods, this can have a punishing impact on your financial future. 'With tax year end fast approaching, one simple task is to fight inflation to make sure you're using the most of your tax wrappers, such as pensions and ISAs. Paying less is one of the most effective ways to guard against the impact of price rises as it means you get to keep more of any growth and income, helping your money to grow faster." When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results. Sign in to access your portfolio
The Independent
25-02-2025
- Business
- The Independent
Inflation and interest rates predictions: What it means for your money in 2025
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Hopes of interest rates coming down quickly this year appear to be fading amid rising taxes and economic uncertainty in the UK. Inflation may no longer be at double digits and the cost of living measure even managed to hit the 2 per cent target last year, which prompted interest rate cuts in August and November. But despite an interest rate cut in February and the cost of borrowing figure now being at 4.5 per cent, there are concerns that inflation may now be heading the wrong way and further rate cuts could be pushed back. Is the inflation rate rising? Inflation measures the cost of goods and services in the UK. This includes everything from your energy bills to your food shop. It is measured by the consumer prices index (CPI) and calculated by the Office for National Statistics (ONS), which revealed a figure of three per cent for January, up from 2.5 per cent in December. Laith Khalaf, head of investment analysis at AJ Bell, said: 'Inflation is now one per cent away from target and heading in the wrong direction, and consumers better buckle up for prices to trend higher throughout this year. 'The Bank of England reckons inflation will hit 3.7 per cent in the third quarter, and that's without a potential tariff shock stemming from US trade policy. The chancellor's decision to raise national insurance and the national living wage from April will no doubt feed into the inflationary dynamic.' Joe Nellis, an economic adviser at accountancy firm MHA, adds that increases in household utility bills will provide an even greater uplift on prices. He said: 'From April, the national average household water bill will increase by £123 a year to £603, a considerable uptick of 26 per cent, and the cap on energy bills is expected to rise in the same month.' Tuesday's announcement shows the cost for the average household being an additional £9.25 a month for energy. Craig Rickman, personal finance expert for interactive investor, added: 'The VAT hike on private school fees is already starting to bite, while the employer national insurance increase and national minimum wage rise are set to kick in from April. Many businesses have warned these additional costs will force them to raise prices.' When will interest rates be cut? With inflation remaining sticky, experts warn that the Bank of England may be more reluctant about further interest rate cuts. That is despite the Bank cutting interest rates in February. Rickman said the Bank of England's Monetary Policy Committee has plenty to consider when it next meets to set interest rates on 20 March. He said: 'The Bank has alternated between reductions and holds since it kickstarted the rate-cutting process in August 2024 and after voting to slash the bank rate a couple of weeks ago, it seems this trend will continue with a hold the most likely outcome next month.' Nicholas Hyett, investment manager at Wealth Club, added: 'Making matters worse is the substantial uptick in core inflation – which strips out food and energy prices and is considered a better measure of domestically generated inflation. With core inflation nearly twice the Bank of England's target we see little chance the Bank starts cutting rates again any time soon.' Khalaf said the markets are pricing in two further rate cuts this year, but added: 'There are risks to the market's view that rates will move lower throughout this year. At 5.9 per cent, pay growth is high and seems to be on a rising trend, which may be pumped up by the rise in the National Living Wage. 'A strong dollar and trade tariffs could also add to inflationary pressures.' For these reasons, Khalaf suggests cutting rates remains a risky move. He said: 'To cut rates in the coming months, the Bank of England would need to do so in the face of what it admits will be rising inflation. Of course, the Bank must look to the longer term when it comes to monetary policy, but cutting rates while inflation is heading in the wrong direction is still a pretty sticky wicket.' What do higher rates and inflation mean for your money? Higher inflation could mean interest rates remain at their relatively high levels. This would be a blow for anyone looking to buy a house or remortgage as mortgage lenders may be reluctant about cutting pricing or offering more competitive deals. Savers, who have benefited from rates being at 15-year highs, could continue to benefit although many of the best deals have been disappearing in recent months. There are still plenty of savings accounts offering above four per cent, however. Additionally, higher or rising inflation may eat into your returns. Dean Butler, managing director for retail direct at Standard Life, said: 'For borrowers and mortgage holders, the prospect of higher-for-longer interest rates will be frustrating. 'However, for savers, an extended period of elevated rates provides an opportunity. Easy-access cash savings deals at or just below five per cent remain available, but as inflation picks up it will more aggressively erode real returns. Shopping around for the best rates remains crucial.' As inflation races away from the UK's two per cent target, Rickman said it offers a timely reminder to investors and savers to make sure their money is working as hard for them as possible. He said: 'If inflation outpaces the return you receive, your wealth will erode in real terms. If not kept in check over long periods, this can have a punishing impact on your financial future. 'With tax year end fast approaching, one simple task is to fight inflation to make sure you're using the most of your tax wrappers, such as pensions and ISAs. Paying less is one of the most effective ways to guard against the impact of price rises as it means you get to keep more of any growth and income, helping your money to grow faster." When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
14-02-2025
- Business
- The Independent
The pension fee trap: How 1% could cost you £50,000
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. In your workplace pension, your savings will be squirrelled away in shared investment pools called funds. Savers like you have clubbed together to buy shares in companies, bonds, property or other assets and you own a share of this fund. It's a cheap way of investing in a number of assets, splitting the risk. There are thousands of funds, but they divide between two broad types. Active funds, where a manager decides what to invest in, and passive, also known as index or tracker funds, which just mimic a market such as the FTSE 100 in London or Wall Street's S&P 500. In recent years, there has been a shift in investing from active funds, which cost more because of their staff of decision-makers and researchers, which may eat up 1-2 per cent of their value per year, to cheap index funds which may cost as little as 0.07 per cent. Do these percentages look like piddling amounts not worth comparing? Let's do some quick maths. Let's say, for ease of round numbers, you have a pensions pot of £50,000 which grows at five per cent per year. If you pay fees of 0.25 per cent, after 30 years with no fresh deposits, your £50k would be worth £201,183 because of the magic of compound returns. After all, your five per cent growth is only being shrunk by 0.25 per cent in fees. But on fees of 1.25 per cent, a quarter of your five per cent returns are getting chewed up and you will have £150,875 – more than £50,000 less and all because of that extra one per cent fee. If you want to keep that extra fifty grand in your pension for your retirement, read on. According to investment firm AJ Bell, only a third of active funds have grown quicker than a cheaper, passive alternative in the last 10 years. Statistics like this have helped encourage savers to withdraw £100bn from actively managed funds in the last three years, according to the platform. Active managers' woes have been accelerated by the dominance of the so-called magnificent seven tech stocks including Apple, Alphabet, Meta, Nvidia, Tesla, Microsoft and Amazon. No need to pay for a fancy (and expensive) fund manager to tell you what you already know – tech stocks are growing and you can buy a cheap fund investing in US stocks to access them. And with the S&P 500 in the US returning 23 per cent in the last year and 88 per cent in the last five years – returns mirrored in the tracker funds which use the same investments - active managers have a hard time competing and beating that sort of growth. Laith Khalaf, head of investment analysis at AJ Bell said: 'Passive investors say we will have that market return, thank you, without doing the leg work, we just won't charge the fees. There are few signs that active managers make a comeback, said Mr. Khalaf, unless stock markets take a nosedive and investors start looking for expertise again. For young investors looking to invest solely in stocks, because with decades until retirement, they can shoulder the risk, there are few better investments than a tracker that takes in all the world's stock markets, he said. Called global trackers, they take in companies in the US, Europe and Asia mainly, with small allocations to every other listed company sector. 'If you want a one stop shop and you're a younger person who wants to take the risk of a global equity fund, a global tracker is where it's at.' A word of warning: it does come with risk. Trackers are weighted towards the bigger companies, and with firms like Apple and Microsoft tipping the scales at more than $3tn in value apiece, you can find that about a fifth of your investment is just in the magnificent seven mentioned earlier. 'I think it's worth being aware of that risk. Once you've started investing in a global tracker fund, start upskilling yourself and make more active calls if you need to,' Mr. Khalaf added. Another way to mitigate risk is to save and invest regularly. Then even if there is a market downturn you are buying at a cheaper price.
