Coming! Ready or not! Base rate rise in 2014?

It was great to speak to Danny Pike on BBC Surrey and BBC Sussex last week about the Governor of the Bank of England, Mark Carney's, speech at Mansion House in London on the significant possibility that the Base Rate will rise from its current historic level of 0.5% pa. You can hear this radio slot here:

The issue is not that rates will rise, but that we may not see the old 'norm' of 5.00% pa -the Monetary Policy Committee believe 2.5% to 3.00% pa in around 2/3 years’ time is more likely. There is no guarantee where they will settle in the future and at what rate. The only certainty is the uncertainty, but the trend is certainly pointing up. The strength of Sterling as a currency jumped in the aftermath of the speech. I think rates will now rise this year.

It was also good to discuss the positive economic data available which has moved faster than anticipated to put pressure on the Bank of England to delve into its tool box of instruments to keep the UK economy from overheating.

Data recently available provides the following examples:

• Unemployment falling to 6.6% (2.16M, Source: BBC 11 June 2014)
• House price indices rising quickly
• Positive and upgraded GDP figures (Gross Domestic Product/ effectively what we produce as a nation in a period)
• Sterling strong
• Manufacturing increasing well
• Stock markets at near highs
• Inflation falling

These are only examples and individually may not have significant impact. However, as a group together, they have all moved positively and at a pace unexpected by some. Obviously, past performance is not an indication that these will continue or improve further.

The impact of this possible change is likely to be felt by individuals and businesses alike. For companies, they might find their product costs for export increase, along with any borrowing costs they may have.

For individuals, the impact will have different effects on borrowers and savers.

For borrowers, the cost of their finance is likely to increase if not on a fixed rate arrangement. They should prepare and interrogate their household budget, adjusting costs now to tuck away a buffer against these increased costs where possible.

For savers, their deposit rate 'drought ' may be coming to an end. This may be dependent on banks and building societies passing these future rate rises on to customers, although I am sure they will not hesitate for borrowers. As I noted in my radio interview, the currently attractive Pensioner Bond offering at the beginning of 2015 looks good now. This view may change in time as rates rise steadily.

The message from this blog is be ready, however you could be affected. Reviewing your financial planning now, over the summer of 2014, could well be a wise use of time to prepare for the changes ahead.

The Chapters teams in Guildford and Woking are well placed to advise you on savings and financial planning for your finances. No individual advice is provided during the course of this Blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters team in either Guildford or Woking.

Keith Churchouse, FPFS
Chartered Financial Planner
ISO22222 Certified Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Investment Performance & Review 2013

2013 has started with many clients seeing positive returns on their investments, pensions and other holdings. It is always good to report such positive news, with many clients that we have undertaken reviews for being pleased with the progress made. This does not mean that we will not see additional volatility into the future. However is it encouraging to see fund values increasing in many instances. 

We gather information on investments from many sources to ensure and maintain a robust advice process. One source is our colleague, Stephen Williams, Managing Director at Cormorant Capital Strategies Ltd, who notes: 

Output and employment have sustained a curious push-me-pull-me trend in recent months. The first quarter of 2013 was no different. On the ILO* measure (perhaps the most credible of all the different measures); unemployment has drifted higher from 7.8% of the available workforce to 7.9%. At the same time the year-on-year increase in average earnings continued to slow; it now stands at just 0.8%, a full 2% lower than general inflation. In contrast to this increasingly gloomy backdrop came a surprisingly upbeat initial estimate for economic growth at 0.3% compared with the previous quarter (or 0.6% compared with a year earlier).

According to the Office for National Statistics the first quarter, it seems, was witness to a higher rate of growth than most had come to expect. Sensible observers were expecting a marginal gain (or decline) in the order of 0.1% to 0.2%. Both the Bank of England and the Office for Budget Responsibility were predicting that a triple-dip recession would be narrowly avoided. It was broad-based expansion in the service sector that led the growth, again (0.6% contributing 0.5%). Meanwhile production was flat and construction contracted, again (-2.5% contributing -0.2%).

Of course, that we describe growth in the region of 0.3% as ‘upbeat’ is testament to the duration of the current economic malaise. A full five years on, GDP remains 2.6% below the pre-recession level. Nevertheless, there are positive signs; equity markets are buoyant and eased credit conditions has inflated house prices a little. But both of these will need to be sustained if, in the absence of a sudden and somewhat unlikely rebalanced economy, we are to see any kind of momentum toward a real recovery.

Stephen Williams

Managing Director
Cormorant Capital Strategies Ltd

*International Labour Organization

The team at Chapters Financial has spent much time over the last years with existing clients and new enquirers viewing existing holdings and making changes where appropriate to meet both their attitude to investment risk and the objective of their plan, such as capital growth or income.

If you would welcome a review then please let us know and we can arrange to meet at a suitable time to undertake any agreed changes that may be appropriate in your circumstances. 

Past performance is not a guarantee of future performance. Fund values can fall as well as rise.

This Blog provides general information and should not be used as individual advice.
If you, your business or charity would like to receive individual advice on the issues of investment or pension planning , then please contact the team at Chapters Financial Limited on 01483 578800.

Keith G. Churchouse FPFS
ISO22222 Certified Financial Planner
Director and Financial Planner 

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

The Financial Conduct Authority does not regulate Tax advice

The Queens Jubilees/ An economic comparison

First of all, may I wish Her Majesty the Queen many congratulations on her Diamond Jubilee of her ascension to the throne in 1952. I am one of many who admire her courage and energy in fulfilling her many duties and we are honoured to have her as our Queen.

The preparations for the Diamond Jubilee across the UK are gaining pace with Bunting, flags and homemade crown posters appearing in many villages and street corners. It certainly brightens many communities at a time of austerity and with many families, companies and individuals working hard to make ends meet.

It makes me feel rather nostalgic, as I reminisce about what for me was the last big Jubilee of 1977. To age me, I was 10 at the time and the prospect of a street party was very exciting indeed. With Union Jack hat made, I remember (in true British style) that it poured with rain that afternoon and we moved the party indoors. It did not dampen any spirits and much merriment was had by all. The children filled to the brim with tartrazine (a now well-known orange squash colour additive of the time), they played for hours. All great fun!

Obviously, at the age of 10, it was not my time to understand the detail of what was happening to the economy at that time and have referred back to the history books to investigate this further. We all know that the past is not a guide to the future, however, it nevertheless offers some interesting insight into the time then, and possibly a few comparable’s with what is happening now.

From an economic point of view, the 70's were in general a difficult economic period. With the price of oil reaching (at the time) a peak in 1973, Industrial disruptions and high unemployment to name but a few issues, the background to Her Majesty's Silver Jubilee was not that pretty. Sound familiar? As other points of reference, Labour was in power (with James Callaghan), Jimmy Carter became the 39th President of the United States of America in January, Punks and the Sex Pistols were rebelling at every opportunity and we endured the 'long hot summer of '76' the year before. We had only been in the European Economic Community (as it was known then/Now European Union) at that time in 1973 (Joining in 1973 with the agreement signed by Edward Heath).

But what was happening in the economy in June 1977? I have detailed some of the economic headlines/indices below:

• (RPI) Inflation Rate: 17.7%
• Bank Base Rate (04th May 1977): 8.50%
• UK Unemployment Level: 5.6%
• Dow Jones Index (01 June): Open 898.66,
• Litre of Petrol: 18p a litre (as was Diesel!)
• Gold Price 08/06/1977 per ounce: $142.30
• Average House Price 1977: £13,600
• Price of a Pint of Lager Beer (Probably from a Party 7 tin if you remember those!): 20p
• Price of a loaf of bread: 9p

Sources: Wikipedia, Yahoo, Guardian, AOL, Others

I am sure that these facts and figures will make interesting reading. It is ironic that the gathering of this information was achieved via the internet at the touch of some buttons. You could not have done that in 1977!

And what of the future? Many pundits have suggested that we live in unchartered waters, and I am sure that this will prove (in many quarters) to be true. What we can be certain of is that change will occur, both in personal circumstances/life phases and the economic environment which we live, work and retire in. Seeking independent financial advice on (and reviewing) your financial planning on a regular basis is important in ensuring that you get the best from your finances as times change.

I hope you enjoy the long weekend of the Diamond Jubilee and if you are looking at your financial situation over the summer, then come and speak to Chapters Financial Limited and see how we can help you with your future planning.

Past performance is not a guide to future performance and no individual financial advice has been provided in the content of this blog.

Keith G Churchouse, Chartered Financial Planner
Director, Chapters Financial Limited

Chapters Financial Limited is Authorised and Regulated by the Financial Services Authority. Number 402899