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Three personal finance experts answer questions that should help savers decide what best to do with their money
I'm buying a house. Should I go ahead with the deal?
Probably not if you're a first-time buyer and are thinking it is a first step to climbing the property ladder.
Thinktank NIESR is predicting a real fall of nearly 5% this year and falls of 1.5% a year for the next four years, while ratings agency Fitch says: "The weak economic outlook and restricted credit availability lead Fitch to consider a further decline of UK house prices of 5-10% annually over the next two years as likely." If the forecasts are correct, it could mean today's first time buyers will see the value of their deposit wiped out or even fall into negative equity. But the Royal Institution of Chartered Surveyors reckons prices will dip 2% this year and will not fall by more than 5%.
I'm coming to the end of my mortgage deal. What do I do?
Tracker mortgages, which follow the Bank of England base rate, look far more attractive than fixed-rate deals now economists are forecasting low rates for possibly years ahead.
If you're at Nationwide, go on to its 2.5% standard variable rate (SVR). But borrowers at other lenders with high SVRs (such as Kent Reliance's 6.08%), should strongly consider moving to a tracker. ING Direct and First Direct both offer "lifetime" deals at about 2.5%, but only those with a large deposit need apply. Even borrowers locked into fixed deals with hefty early repayment charges could find it is worth paying the exit penalty.
I'm on a tracker. I'm laughing aren't I?
Not if rates do rise. Use the opportunity of low monthly mortgage payments to overpay your mortgage . It saves a fortune in the long term; for example, someone with a £150,000 mortgage who pays in an additional £100 a month would save £14,000 and lop four years and three months off the 25-year mortgage term.
I've had a windfall. What do I do with it?
Mark Dampier, of Hargreaves Lansdown, which looks after more than £20bn in client money, says: "Sit on the sidelines for now, and bide your time. There's going to be one hell of an opportunity soon."
Big British blue chip companies, such as Unilever and Glaxo are paying dividends worth 5-6% a year, twice as much as money will earn on deposit in a bank. "I would be looking to buy into them on decent falls, but don't put it all in at once. We are in the hurricane season for stock markets, and we could see weeks in which prices fall by 10%," says Dampier.
If there is deflation, the bank could be the best option. In Japan, where deflation has taken hold, the stock market is trading at just a quarter of its 1989 level.
Shouldn't I shove it all in gold or silver?
Over the past year, gold has risen to nearly $1,900 (£1,190) an ounce, but Blackrock, which manages the UK's biggest gold fund, says gold "continues to look somewhat overbought". In the last week of August, after touching $1,900, the gold price fell $150 in just a few days of trading. However, Blackrock says buyers reappeared swifty, suggesting that "downside is limited".
Warren Buffett has bought $5bn of Bank of America. Should I buy bank shares, too?
Buffet can structure huge deals at times of acute financial stress. Small investors cannot. But anyone who bought Barclays shares in early 2009 made a fortune as they rocketed from 51p to 377p (now they are back at 150p). But Hargreaves Lansdown adviser Mark Dampier warns investors to steer well clear. "No one knows what's under the bonnet in the banks. In Europe, inter-bank lending has halted. If the banks won't lend to each other, what does that tell you?" he says.
I've got a stock market Isa/unit trust which I'm paying into each month. Should I keep paying in or bail out?
If you don't need the cash now, you should probably stick with it, as selling would simply crystallise the loss. It is worth retaining a sense of perspective. The market stands at the same level it did in mid-July 2010. Most experts say "drip-feeding" money into an Isa or unit trust is the right thing to do. "Regular investing each month gives you a lower risk profile by helping to smooth out some of the stomach-churning highs and lows in the price of shares," says Annabel Brodie-Smith at the Association of Investment Companies.
I'm retiring very soon and worried about my pension. What should I do?
If you are near to retirement, you may have escaped the worst of the recent turbulence. Many workplace schemes automatically move people's money into safer havens such as bonds, property or cash during their last decade at work. This is known as "lifestyling".
The bigger problem for those about to retire is that annuity rates have fallen by about 3% in the past two months. A £100,000 fund is now generating £6,624 a year compared with £6,831 two months ago – an annual loss of £207, which adds up to £5,000 over 25 years, said Key Retirement Solutions.
One option is to stay at work, perhaps part-time. If that is not possible, some or all of a pension can be deferred until conditions improve.
Those in a final salary scheme get a promised level of income, no matter what happens to the stock market.
- Euro
- Shares
- Investments
- Stock markets
- Currencies
- Europe
- Mortgages
- Remortgaging
- Isas
- Gold
- Personal pensions
- Pensions
Patrick Collinson
Miles Brignall
Rupert Jones
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