Brexit: what you should and shouldn't do now with your money

The dos and don’ts for important money decisions on mortgages, savings, pensions and more as the country faces Brexit.

The UK voted to leave the European Union in a historic referendum last Thursday (23 June). The monumental decision has sent shockwaves around Britain and the world.

This morning, Chancellor George Osborne sought to calm matters down, stating he would do everything he could to make the process of leaving work for Britain.

He added that the Treasury, Bank of England and the Financial Conduct Authority all had "robust" contingency plans in place for the immediate financial aftermath of a leave vote.

However, he warned that the economy would have to "adjust" to the new situation. 

“Today I am completely focused on the task in hand as Chancellor of the Exchequer to bring stability and reassurance,” he concluded.

So while he gets on with maintaining fiscal stability for the UK, here’s what you should and shouldn’t do with your money right now.

Mortgages

Many experts are anticipating the base rate is likely to be cut by the Bank of England in an attempt to better support the economy through this turbulent time.

David Tinsley, a UK economist at UBS, says he expects two rate cuts over the next six months, taking rates from a current record low of 0.5% to 0%.

Cutting the base rate would make it cheaper for banks and building societies to lend, which could mean we see mortgages get even cheaper than they already are.

So, if you’re thinking about taking out a mortgage, it could pay to wait a few months before locking into a fixed-rate deal or exploring a variable rate deal that moves in line with the Bank of England base rate.

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Savings

Unfortunately, the predictions that the base rate could be cut to zero in the next six months is bad news for savers.

When the base rate was slashed to a record low of 0.5% in 2009, savings rates dropped off dramatically and have hardly recovered.

Further reductions to the base rate could mean savings rates are cut even further as banks and building societies have less incentive to attract new deposits with attractive rates.

This, coupled with the threat of rapidly-rising inflation, could mean your savings actually lose value in real terms.

So savers should act quickly try to lock into a fixed-rate deal before rates start to drop. Take a look at Where to earn most interest on your cash.

There have been concerns about the safety of UK deposits following Brexit.

The Financial Services Compensation Scheme (FSCS) protects the first £75,000 of deposits per person per institution. The level of protection is set by an EU directive between member states across all EU countries, but it the actual scheme is run by the UK Government.

Savers shouldn’t worry about leaving their money in their accounts as the FSCS has confirmed the scope and coverage remains unchanged and deposits will be protected as normal.

The only thing that may change in the future is the level of this protection, which you should watch out for.

Pensions

The rates on annuities have started to fall thanks to the result of the referendum.

Just Retirement and Retirement Advantage have announced cuts today and experts warn more are likely to follow.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, suggested anyone looking to buy an annuity should do so now before rates drop any further.

He said: “Gilt yields and annuity rates have been dropping steadily over the past year. The events of the past couple of days have given new momentum to that trend. For any investor planning to buy an annuity in the immediate future, it may make sense to do so sooner rather than later. Once you’ve obtained a quote from an annuity company, the terms are usually guaranteed for between two and four weeks.”

2 pension annuity rate cuts already announced this morning. If you were planning on buying, then you might want to get your skates on.

— Tom McPhail (@PensionsMonkey) June 27, 2016

Investments

The market is experiencing a period of volatility and uncertainty, but if you have investments the key message from the experts is ‘don’t panic’.

As was widely anticipated, the vote to leave put the markets in turmoil on Friday. The FTSE 100 closed over 3% down, while the FTSE 250 took a bigger hit and closed over 7% down before the weekend.

Tom Stevenson, director for personal investing at investment company Fidelity International, said now more than ever is the time to keep a calm head.

“It is important to remember that market volatility is a normal part of long-term investing and with the benefit of hindsight some of the most turbulent times in stock market history are barely visible on a chart of the market’s ups and downs,” he said.

“Over time the risk of holding equities is usually rewarded and markets invariably overshoot in both directions.

“I urge investors to avoid stopping and starting investments. Timing the market is fraught with danger because the best days in the market often come hot on the heels of the worst.

“Withdrawing from the fray can mean you miss out on these rallies and doing so can seriously compromise your long-term returns.”

For those without investments or looking to cash in on the falls now could be the time to pick up some bargain shares, so long as you believe the companies will recover in the longer term.

Visit the loveMONEY investment centre

Currency

The pound fell to its lowest level since 1985 following the referendum result on Friday. While this is likely to have a big impact on inflation it is also bad news for the currency market.

The euro exchange rate is currently €1.20 to the pound.  At the start of the year, the exchange rate was €1.36. The pound is down even further against the US dollar which is now at $1.32. At the start of the year it stood at $1.48.

This means getting holiday money to Europe and the US will be much more expensive. However, it is expected that the impact on sterling will be for the sort-term.

So if you’re going on holiday soon you should hold off on buying your currency for as long as possible to avoid getting a rubbish deal.

Another option is to buy your currency from a provider that allows you cancel it for free. This means you can lock into today’s rate, but if it improves you can cancel it and buy into a better deal.

Alternatively, you could also take a look at a competitive prepaid currency card that gives you great exchange rates on the day you spend.

The recently launched Travelex card is a good bet if you plan to only spend on card. Read: Travelex Supercard: "cheapest" prepaid travel money card launches nationwide.

But there are a range of other options if you also need to take cash out while abroad. Read The best UK prepaid cards for spending abroad.

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