The results are in, and the United Kingdom has decided to leave the European Union by 52% to 48%. Whether you were for or against exiting the EU (Brexit), I commend everyone who took the time to vote, as I believe we are privileged to live in a democracy and we should always use that right.
There’s so much debate and confusion about how the decision to leave the EU will affect us, both long-term and short-term, so here is a breakdown of some of the key issues I’ve learned today.
Interest Rates and Mortgages
When the outcome of the referendum first emerged, the pound fell dramatically, but there has since been some recovery. It is too early to tell whether the pound will recover, thrive or remain weak. Hopefully, we will be able to negotiate trade deals with Europe, which will help the value of the pound to recover again.
If the pound remains weaker as a result of withdrawing from the EU, it is likely that interest rates will increase. This is good if you are a saver, but if you have a mortgage or a loan, it will mean you have to pay more back. You will still be able to get the Help-to-Buy ISA, as this wasn’t an EU scheme.
If the pound remains weak then you could face higher petrol and diesel almost immediately. Brian Madderson, chairman of the Petrol Retailers Association, has said that a rise of 2p-3p a litre was on the cards.
If you’re going on holiday, a fall in the value of the pound is bad news, as you’ll get less bang for your buck. Holidays to other EU countries will be more expensive because we will have to pay more for accommodation that is priced in Euros. The cost of flights will depend on the airline. Ryanair and Easyjet have argued that they will be more expensive as a result of leaving the EU, but British Airways have said it won’t be affected.
George Osbourne, the Chancellor of the Exchequer, has said that leaving the EU might causes taxes to rise. He suggested it might result in a 2p rise on the basic tax rate – currently 20p in the pound – and a 3p rise in the higher rate – currently 40p. He also said Inheritance Tax might rise by 5p, from its current 40p. Nothing has been decided on this yet, but it’s something we might face in the future.
Again, if the pound remains weaker, house prices may go down. This is good news for first-time buyers, but not good for people who are already on the property ladder, as the value of your property may fall.
The UK benefits system is almost entirely governed by the UK Parliament, not Europe, so benefits are unlikely to be directly impacted.
What have you learned so far from the referendum result? Do you think it will have a positive or negative affect on your finances? I’m really keen to hear what you think.