Brexit: how our wealth has changed since the referendum

From food to fuel, we analyse how our finances have changed since the Brexit vote.

Prime Minister Theresa May has confirmed that Brexit talks will officially start next March, which means we’ll likely leave the EU in mid-2019.

But even though Brexit is still years away, it’s already had a notable impact on our finances – in both good ways and bad.

Here, we highlight some of the key changes we’ve seen since June’s landmark vote.

Note: as we wrote about here, there’s been a lot of speculation about Brexit. This article focuses on things that have actually happened, not what may or may not lie ahead.

The pound has plummeted

In the build-up the referendum, a pound was worth €1.30 and close to $1.50.

Now, it’s trading at a five-year low against the euro (€1.13) and a 31-year low against the dollar ($1.27), as the graph below shows.

A weak currency can have a huge impact on prices as it effectively drives up the price of anything we import – from food to fuel.

These increases tend to take a while to filter through to us (and we’ll cover them in more detail later), but anyone heading abroad is already well aware of sterling’s demise: £100 exchanged for US dollars today will get you $20 less than in June.

Of course, a weak pound isn’t bad news for everyone…

Pound versus dollar since June (image: XE)

Image: XE

The FTSE has soared

After a short and sharp fall in the wake of the referendum, the FTSE 100 embarked on a remarkable rise from under 6,000 to close at a near-record high of 7,074 on October 4 (see image below).

A key factor in this has been sterling’s freefall: the FTSE 100 is made up of multinational companies, which make most of their money abroad. These profits subsequently look far more attractive when converted back into pounds.

But the stock market bump isn’t solely due to the pound. One rung lower, the more UK-centric FTSE 250 hit a record high on Tuesday (October 4).

This index, which is seen as a better barometer of the health of UK businesses, has been buoyed by a string of stronger-than expected economic results.

Whether these levels are sustainable long-term is up for debate, but what isn’t is the fact that markets have thrived since June – to the benefit of many investors.

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FTSE 100 since June (image: LSE)

Image: LSE

Grocery prices have risen… just

There were many predictions that the cost of our grocery shop was going to soar as the cost of importing food soared, but so far prices are only marginally higher.

Analysis by grocery price comparison site mySupermarket found that the bill for 35 staple items in June stood at £82.83, compared to £83.19 in September.

However, it’s worth noting that prices have been falling for the last two months, following a pronounced jump in July.

This is largely due to the ongoing competition between supermarkets, which is helping offset most of the Brexit-related food price inflation, says Gilad Simhony, mySupermarket boss.

“The price wars between the retailers appears to have overcome any inflation issues caused by the weaker sterling,” Simhony says.

"We are also seeing both consumer confidence and prices stabilising across the board, which is a positive sign for the UK grocery market."

Fuel prices have edged up

Back In June, motorists were paying an average of 111.6p for a litre of unleaded and 111.8p for diesel, according to the AA motoring group.

Fast forward to September and prices at the pump for unleaded is fractionally higher at 111.8p, while diesel had increased to 113.1p.

Commenting on the rise, Luke Bosdet, a spokesperson for AA, says the Brexit vote was certainly one factor in play.

Savings rates have tanked

As if savers weren’t having a tough time already, savings rates have nosedived since June. This is largely due to the Bank of England cutting the Base Rate from 0.5% to 0.25% in August in a bid to stimulate the economy.

Banks and building societies duly responded by slashing their (already paltry) savings rates – some by even more than 0.25%.

And the damage is ongoing – in the last week alone, we’ve seen three more banks cut the rates on their best-paying accounts.

So Brexit has been bad news for savers so far.

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Mortgage rates have fallen since June

Mortgages are cheaper

The flipside of Base Rate being cut is that mortgages have got cheaper.

Finance data website Moneyfacts found that average variable and fixed mortgage rates fell to record low rates in August.

Remarkably, average short-term mortgage rates are now edging toward 1%.

It’s not just homeowners who have benefitted: Moneyfacts points out that two- and three-year fixed-rate buy-to-let products are all falling, while five-year deals have hit their lowest-ever level.

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House prices keep rising

The Brexit vote certainly hasn’t triggered a housing price crash in the short term.

Looking at data from Nationwide Building Society – which admittedly doesn’t look at the entire nation’s housing stock – prices edged up 0.5% in July, 0.6% in August and 0.3% in September.

Interestingly, Nationwide's chief economist Robert Gardner notes that buyer demand has been falling, but limited housebuilding means demand continues to outstrip supply, thus ensuring prices keep rising.

“Survey data indicates that, while new buyer enquiries have remained fairly subdued, the number of homes on the market has remained close to all-time lows, in part due to low rates of construction activity.”

Inflation is slightly higher

Clearly some areas of our finance have gone up, while others have fallen. But what’s the overall picture? Perhaps it’s best to finish on inflation figures, which give us a snapshot of the rough cost of living from month to month.

In June, the CPI inflation index stood at 0.5%. By July it had edged up to 0.6% and that remained unchanged in August (the latest available figures).

So overall the cost of living has edged higher, but by an almost insignificant margin.

So there you have it. That’s what’s happened to our finances since the June vote. What happens next is anybody’s guess. What about you specifically? Do you feel better or worse off? Let us know by voting in the poll below.