Brexit Chaos Ahead!?
As the politicians continue to bicker about the future of our country and its involvement with Europe and the rest of the world, the Bank of England boss Mark Carney briefed the Cabinet last week, on what a no-deal chaotic Brexit could mean for the economy. Essentially a housing crash and prices which he says could fall by up to 35%. As ever, finance is a complex chain of events. If we crash out of the EU, then sterling will collapse as global investors beat a retreat, pull their money out of the UK and ditch their pounds in the process. If the pound becomes much weaker, then things we import cost us more. Fridges, cars, raw materials etc. And so inflation starts to rocket upwards as prices increase. As inflation rises, the Bank of England uses interest rates to try and keep this under control, effectively dishing out an economic chill pill and dampening our ability to borrow and spend. And there you have it. As interest rates head north, mortgage rates also jump upwards and BOOM – the demand for property tails off.
Thanks to our friend Holly Mackay at Boring Money for this simple, non-political explanation of what might happen next year.
All this uncertainty is likely to raise questions about how this will affect investments and future planning. This is where the specialist Planning Team at Magenta can help to allay any concerns by modelling alternative personal scenarios using various different assumptions for investment growth, inflation and interest rates.
Mr Carney’s prediction is based on a no deal scenario, but most financial commentators believe there will be some kind of fudge and that this has already been priced into the investment markets, so little will change.
We do not have a crystal ball and cannot predict the future, but we can look at options and provide reassurance if needed. We encourage clients to relax about things they (and we) cannot control, – it makes no sense to base a 30/40 year retirement on what might be a short term issue.
Our advice – hang in there; don’t panic and ensure you have enough cash for everything you want to do for the next couple of years.
If you have any concerns about how Brexit may affect your and/or your family’s future, do call us for a friendly chat.