- The Guardian Saturday 3 August 2019
(^42) Money
The pound’s slide could make it worth
booking holidays well in advance
Continued Page 41
What you can do
If you are about to come off a fi xed-
rate deal, and believe we are heading
to no deal, then hold your horses.
As recently as 2016 mortgages were
off ered at rates as low 0.99% – a
signifi cant saving over the 1.3% to
1.7% best buys available this week.
The other strategy is to take out a
tracker mortgage that moves down
(and up) in line with Bank of England
base rate.
For example, Nationwide has one
of the cheapest two-year tracker
remortgage deals on off er – at
1.44% – which tracks the base rate,
and adds 0.69%. If base rates went
to zero, buyers would see their
monthly payments fall massively as
their pay-rate would drop to 0.69%.
However, buyers need to be
aware that if interest rates went up
substantially later on, payments
would rise accordingly, says L&C’s
David Hollingworth. He says most
buyers will still want to stick with a
fi xed-rate deal, given that they are
still at very low historical levels, and
buyers have the security of knowing
what they paying for its term.
- Savings and cash Isas
The possible scenario
The Bank of England moves
quickly to cut interest rates
and embarks on a new round of
quantitative easing to boost the
economy. Once again the banks are
awash with cheap money, meaning
the interest rates payable to those
with savings is only going one way –
down. At the height of the fi nancial
crisis the rates payable to savers in
plenty of accounts fell to 0.1%.
What you can do
If you believe that no deal is now a
likelihood – and you want to keep
your savings in cash – now’s the
time to move them into a fi xed-rate
bond that guarantees the rate for
the bond’s term. This week Metro
Bank was off ering a one-year, fi xed-
rate bond paying 2%. If you want to
lock your money in for two years,
FCMB Bank is paying 2.22% , while
fi ve-year bonds promise 2.4%. If
you prefer to have some access
to your cash, the Charter Savings
Bank is paying 1.81% on balances of
£5,000 and over. Access to your cash
is available with 95 days’ notice.
These rates might look uninspiring,
but if the stock market tanks post-
Brexit, and savings rates collapse, it
will look a very smart move.
- The currency
The possible scenario
Sterling’s slide this week is the
canary in the Brexit coal mine, as
traders began marking the pound
down to what they think it might
be worth in the event of a no-deal
exit. Against the euro, the pound fell
below €1.10, while against the dollar
it was heading to $1.20. A disorderly
departure could see the pound fall
to one-to-one parity against the
euro and the dollar even before the
31 October deadline.
One indication comes from
betting company Boyle Sports. At
the start of year it was giving punters
odds of only 8 -1 that the pound
would collapse to be worth just one
euro, but has slashed the odds to 3 -1
that we’ll reach that point some time
this year.
What you can do
If you think the pound will continue
to tumble, then buying your holiday
money now makes sense, even at
today’s depressed levels. Don’t ever
buy currency at an airport bureau
de change, where rates for euros are
already fantastically low, with many
giving you just 0.9 euros for each
pound. Buy online and in advance
for much better deals; you’ll get
around €1.06 for each pound from
Travelex online this week. See our
separate guide to getting the best
deal on holiday money (right).
The currency’s collapse would
make everything in overseas resorts
this summer more expensive. It’s
probably too late for most people
now, but late bookers may want to
consider half-board or all-inclusive
options to control the costs.
There is also an argument for
booking very early this year for
travel such as ski holidays. If
the pound falls heavily the tour
operators will be forced to raise
prices in sterling, so locking a price
now may make sense. Or decide to
take your next holiday in the UK.TheGuardian Saturday 3 August 2019If you want to take a punt against
sterling and make some money by
trading, all you need is a credit card
and an initial deposit of around
£100-£200 to join online forex
traders such as eToro, City Index
and so on. The big high street banks
also let you trade, with minimum
deposits starting at £10,000. But
forex trading is fantastically risky,
and only those able to aff ord to lose a
lot money should even begin trying.- Pensions
The possible scenario
Workers with fi nal salary-style
pensions aren’t aff ected, as they
have guarantees, but for everyone
else, their pension pot depends
on the performance of the stock
market. Which way will markets go
in a Brexit crash-out?
Broadly speaking, domestically
focused UK companies, which make
most of their profi ts in the UK, will
be obvious casualties and their
share prices could fall heavily in the
next few months. But the giants of
the London stock market – such as
BP, Shell, HSBC and Glaxo – make
the vast majority of their profi ts in
overseas markets, and are much
better protected from Brexit. Indeed,
as sterling plummets they are likely
to rise in value, because their dollar
earnings suddenly become worth
much more in pounds.What you can do
Most people think they can’t do
anything about their company
pension scheme, but they can.
You have to fi nd out who manages
your pension scheme, and then
see what level of control you have.
For example, Legal & General
manages 14,000 pension schemes
for 2.8 million workers across the
UK, including those at GNM, the
Guardian’s parent group.
Members can view the value of
their pension, and make choices
about where the money goes,
picking between cash, equity
(shares) and bonds (which pay fi xed
rates of interest but can also go up
and down in value).
If you are convinced that a Boris
Johnson-led Brexit is going to be a
calamity, that the economy will tank
and UK corporate profi ts collapse,
then you can choose to shift your
pension into overseas shares.
If you believe in a total disaster- a view not shared by investment
experts – you could even choose
to put all of your pension into a
cash fund, which means it won’t
be aff ected by a fall in the stock
market. Alternatively, if you believe
that no deal won’t be that bad, then
that would suggest you buy into
domestic UK companies which
could enjoy a huge “relief rally”. But
remember, going to any extremes in
investing (ie , all your money in cash,
or all in one particular market) is a
very risky thing to do for the long
term, with almost nobody able to
expertly time their investments to
catch major market swings.
- Individual shares
Possible scenario
A Guardian Money reader asked us
this week what to do about his old
privatisation and demutualisation
shares in the event of no deal. Heholds both Lloyds (as a result of
the Halifax demutualisation) and
Santander. Should he sell them, he
asked, fearful that a no-deal Brexit
will send them crashing.What you can do
We’re not going to give advice on
individual shares, but here are a few
pointers. Lloyds is a UK-focus ed
bank which makes nearly all its
profi ts in the UK. Therefore it is in
the bucket of shares not particularly
attractive to worldwide investors,
and if there is a recession after
no deal, it is the most exposed to
customers defaulting on their loans.
But its shares have been weak for
a long time. It was 72p a share just
before the referendum, and is 52p
now. It’s arguable that the damage
from Brexit is already in the price,
although it can always sink lower. It
has returned to paying dividends,
so the yield on the shares is actuallyquite attractive. If you have no
urgent fi nancial need to sell, it may
be worth holding for the long term,
but expect bumps along the way.
Santander is a global bank with
a big British operation. So it is
impacted by Brexit, but much less
so than Lloyds. That said, its shares
have, if anything, performed worse
than Lloyds. They have fallen from
€6.18 in 2017 to €3.90 this week.
Maybe the lesson is that, after the
fi nancial crisis, investors are wary of
banks, and that they will never again
be growth stocks , and you should
hold them instead for a steady
supply of dividends.- Jobs
The possible scenario
A no-deal Brexit would plunge
Britain into a recession that
would shrink the economy by 2%
and push unemployment above
5%, according to the OBR. Greg
Clark, the government’s business
secretary until sacked by Boris
Johnson, said during the leadership
campaign : “It’s evident that if you
have the disruption that comes
from a no-deal Brexit there will be
people that will lose their jobs. It’s
many thousands of jobs. Everyone
knows that.”What you can do
Realistically, most people can do
very little about the threat of job0.99%
Mortgages were being off ered at this
rate as recently as 2016 and may soon
be coming around again17%
Fall in the value of the pound against
the euro since the EU referendum of
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