the times | Saturday September 5 2020 1GM 59
Money
and redistribute across your portfolio.
Jason Hollands from the investment
firm Tilney said: “If you have made
stellar returns off US tech stocks, it
makes sense to take some profits and
trim things back a little, redeploying
into other parts of the market.”0 Buy undervalued sectors
There are many undervalued sectors
that will look attractive to those taking
profits from tech. These include house-
builders, energy firms and banks, and
are collectively known as cyclical
stocks (as their value depends on
market cycles and consumer demand).
Hollands said: “There is a case forrotating into those parts of the market
with greater recovery potential as the
economic activity rebounds.”
Hollands also suggests a punt on the
UK market. This has negligible expo-
sure to technology firms, accounting
for just 1.3 per cent. (The US market has
more than 20 per cent in tech stocks). It
has plenty of exposure to the hard-hit
energy and financial sectors, and the
broader UK market is still down 22 per
cent this year. The cheapest way to fol-
low the UK market is to invest in a
tracker such as the L&G index fund,
which replicates returns of the FTSE-
all-share index instead of picking
stocks. It costs 0.1 per cent a year plusplatform fees. If you want an actively
managed fund (run by managers) Holl-
ands suggests Liontrust Special Situa-
tions (costing 0.83 per cent a year) and
TB Evenlode Income (0.87 per cent).0 America is not all about tech
Investors might want to reposition
their existing US exposure towards
funds that are less weighted to tech
stocks, said Hollands at Tilney.
One way to do this is to invest in the
Invesco FTSE RAFI US 1000 UCITS
exchange traded fund (ETF). An ETF is
like a fund that tracks a market index,
but it is listed like any other share so can
be easily traded. This ETF owns the1,000 largest US companies but its ex-
posure is based on factors other than
the size of a firm. This is unlike normal
market trackers, which invest in firms
based on their market value.
“The result is that you get a broader
exposure to the market with low costs,
but a portfolio more skewed in favour of
businesses on reasonable valuations,”
Hollands said. It is relatively expensive
for an ETF, charging 0.39 per cent on
top of the platform you use to make the
investment. A typical US tracker, such
as the Legal & General (L&G) US Index
fund costs 0.06 per cent but these can-
not mitigate the effects of any slump
Continued on page 60Follow us on twitter @timesmoney | @jimconey | @jessiehewitson | @davidbyers26 | @AlihussainST | @markathertontim | @katedpalmer | @katjdenham | @kenzabryan
First-time buyers fear the end of the low-deposit mortgage
H
SBC has pulled its mortgages
for first-time buyers with small
deposits because it could not
cope with demand.
It was the only big lender to offer
10 per cent deposit mortgages through-
out the coronavirus pandemic. At the
beginning of March, there were 779
deals for first-time buyers with a 10 per
cent deposit — there are now 60,
according to the data firm Moneyfacts.
The average first-time buyer has less
than a 15 per cent deposit, according to
the Halifax.
HSBC said that it had become too
difficult to process applications, partly
because rival lenders had pulled out of
the market. HSBC had put daily limits
on the applications it would considerand brokers said that it was hitting
these by 8.30am on weekday mornings.
It had also put up its rates, including
adding 0.25 percentage points to its
15 per cent deposite mortgages on Fri-
day, but said that this had done little to
put off the droves of first-time buyers
seeking low-deposit deals.
On Thursday Clydesdale Bank,
which offers 10 per cent equity deals to
existing customers, increased its rates
by up to 0.5 per cent. Platform, part ofCo-op Bank, withdrew mortgages for
borrowers with a deposit of 15 per cent
or less yesterday, giving four and a half
hours notice. Accord, part of Yorkshire
Building Society, said it would offer a
first-time buyer mortgage for those
with 10 per cent deposit, but only for
two days — Monday and Tuesday.
Michelle Andrews from HSBC said:
“This is not a decision we have taken
lightly, but one we will be reviewing
regularly.”
Borrowers who have already submit-
ted an application to HSBC may still be
able to get a deal, and the bank said that
it would accept applications from exist-
ing customers seeking a new deal.
The lack of low-deposit offers has
forced many potential buyers to pullout of property sales. Before the lock-
down they could have secured mortga-
ges with deposits as small as 5 per cent.
Some lenders said they had with-
drawn 5 per cent and 10 per cent deposit
mortgages because they could not send
valuers to assess properties in person
during the lockdown. Others, such as
Nationwide, said that they wanted to
limit low-deposit lending because they
feared that a fall in property prices
could push borrowers into negative
equity, where the amount they owe
outstrips the value of their homes.
Aaron Strutt from Trinity Financial,
a mortgage broker, said: “This isn’t
great news for first-time buyers, but
HSBC’s rates were already hard to get.
I have a queue of first-time buyers wait-ing for low-deposit deals to come back,
and this is only going to make it longer.”
Nationwide is still lending to people
with a 10 per cent down payment as
long as they have saved at least three
quarters of the deposit themselves and
are buying a house and not a flat or
maisonette. Its five-year rate is 3.24 per
cent with a £999 fee. Virgin Money’s
10 per cent deal is a seven-year fixed
rate of 3.29 per cent and is also available
only on houses. It has a £995 fee and
getting out of the mortgage deal before
2023 would incur a fee of 7 per cent of
the outstanding debt.
Some smaller building societies offer
low-deposit deals, but are limiting the
number of applications.
Kate Palmer60
mortgage deals available at
90 per cent loan-to-valueWould you
trust a robot
with your
pension?
Pages 62-63
Time to ditch your tech stocks?
A sell-off of US shares this week has sparked fears that the bubble is bursting. Ali Hussain looks at your options
I
nvestors are taking profits from
US technology stocks after a
record-breaking streak, but
experts have advised them not to
abandon the sector completely.
Tech companies have been the big-
gest winners of the Covid crisis as more
people worked from home, shopped
online and used streaming services.
The tech-heavy Nasdaq index surged
88 per cent between March 23 and Sep-
tember 2, but on Thursday it took a
4 per cent tumble, led by US giants such
as Apple (down 8 per cent), Microsoft
(down 6.2 per cent) and Amazon (down
4.6 per cent). The index fell 3 per cent
during early trading in the US yester-
day, as Money went to press.
Analysts have for weeks pondered
how long the markets, particularly in
the US, could ignore the devastation
caused by the Covid crisis. Helal Miah
from the Share Centre, an investment
platform, said: “After an amazing run
since the lows in March, it was inevit-
able that at some point there would be
a correction — Thursday’s market
moves may well be just the start. The
economic reality and stock market val-
uations need to sync up at some point.”0 So has the bubble burst?
Most analysts think not. “The tech-
inspired sell-off in the States was main-
ly the result of a bout of healthy profit
taking,” said Richard Hunter from
Interactive Investor, an investment
platform. “The fact that there was no
particular rush to safe haven assets sug-
gests that rebalancing was overdue.”
Last week, the fund manager Baillie
Gifford, the biggest investor in Tesla,
sold a big stake in the car company, bag-
ging $17 billion (£12.6 billion) in profits.
James Anderson, co-manager of Scot-
tish Mortgage Investment Trust, Baillie
Gifford’s flagship fund, said that he was
still “very optimistic about the future of
Tesla. We intend to remain significant
shareholders for many years.”0 What should investors do?
Rather than sell out, investors should
rebalance their portfolios. Susannah
Streeter from the wealth manager Har-
greaves Lansdown said: “If your US
holdings have grown disproportionat-
ely, you may want to take some profitsA fortnight on the Nasdaq
Aug 24 25 26 27 28 Sep 1 2 3 4 Source: Refinitiv
12,400
12,200
12,000
11,800
11,600
63%
share price rise
Mar 23 - Sept 2
85%
share price rise
Mar 23 - Sept 2
-8.8%
share price fall
since Sept 2
-9.7%
share price fall
since Sept 2
134%
share price rise
Mar 23 - Sept 2
-12.7%
share price fall
since Sept 2
share price rise
Mar 23 - Sept 2
-9.8%
share price fall
since Sept 2
104%
share price rise
Mar 23 - Sept 2
-8.7%
share price fall
since Sept 2
70%