As you may be aware, the date of the UK’s withdrawal from the EU is fast approaching and although there is continued uncertainty around the terms of this withdrawal, we are writing to update you with regards to the potential impact on your mortgage and protection products.
What effect could Brexit have on mortgage interest rates?
The actual impact will depend on the terms under which the UK leaves the EU – in other words whether a deal is ratified or the UK leaves in a ‘no-deal’ scenario.
The Bank of England kept rates unchanged at 0.75% when last reviewed in February 2019, although their forecasts for the next 3 years suggest that rates could increase to around 1.5%. This is by no means certain, however, and will be heavily dependent on the economic climate post-Brexit.
If you are already on a fixed rate deal, any changes to interest rates will not impact your mortgage repayments until the end of the fixed rate period. If, however, your mortgage is currently on variable rate (often referred to as the standard variable rate “SVR” or standard mortgage rate “SMR”) and you are concerned about possible interest rate rises then you could consider switching to a fixed rate deal. If you are coming to the end of your fixed rate deal, or you are currently on a variable rate, we would be happy to advise you on your options if this is an area of concern for you.
Will lenders with whom I have a mortgage with and/or insurers with whom I have protection policies be updating me in relation to any potential impacts Brexit may have?
You may also receive communications from your mortgage lender and/or insurance companies updating you with regards to the impacts of Brexit, although again given that the position is still unclear they may not be able to provide definitive information.
Will Brexit affect the consumer protections I receive?
There will be no changes to consumer protection for the vast majority of customers.
The Financial Ombudsman Service settles disputes between consumers and UK financial services firms where these arise. This service will continue to be available post Brexit, meaning that if you have a dispute with a UK based financial services firm that is authorised by the Financial Conduct Authority, you will continue to be able to refer a complaint to the Financial Ombudsman Service (FOS) if a dispute arises. It is also proposed that you will be covered by the FOS for the activities of EEA based firms that provide services into the UK.
The Financial Services Compensation Scheme (FSCS) will also remain available to UK consumers post Brexit. It is designed to deal with claims from (and in the event of a successful claim, provide compensation to) consumers who have previously dealt with a UK financial services firm that has since gone out of business. The compensation limits are per person, per institution and currently set at £85,000 (deposit accounts), £50,000 (mortgages), 100% of a claim (life assurance and protection), and 90% of the claim (general insurance (e.g. – buildings & contents insurance))
EEA based firms doing business in the UK are not typically covered by the FSCS and instead the compensation scheme in their country of origin will usually deal with any claims against the firm. Brexit could result in a loss of access to these EEA compensation schemes if no deal is reached. This loss of access is dependent on the terms of withdrawal and at this stage, is far from certain.
If you have any queries relating to this letter or wish to discuss any matter relating to your finances then please do not hesitate to contact us on;
Tel: 01869 248339