Contractors' Questions: Is Brexit already affecting my finances?

Contractor’s Question: What are the immediate reverberations from the Brexit on my personal finances as a contractor, and have these started already?

Expert’s Answer: To try to answer to your question, let’s look at three areas: mortgages, insurance and savings/investments.

Firstly then, home loans. The interest rates offered on fixed-rate mortgages are inextricably linked to SWAP rates (SWAP is the money market instrument used by many lenders to fund their fixed rate lending), and any upward movement in these money market rates is likely to follow through to the pricing of 2, 3 and 5-year fixed rate deals, pushing rates upwards.

To head off the impact of a possible rate rise, contractors can secure their next mortgage deal now, locking into today’s current interest rates and avoiding the market uncertainty which is expected to follow Thursday’s vote.

Turning to insurance, remember that companies in the sector have substantial equity holdings, and during the 2008 credit crunch, poor overall performance of investment portfolios held by insurance companies was intimated to impact premiums on life and other protection policies.

With FTSE 100 futures slumping 8% overnight after the vote, and uncertainty over the short to medium term outlook of equities, contractors who are holding off taking up any form of insurance should think again.

Regarding investments, despite the uncertain period to come as the UK brokers agreements with its former partners in the EU, the fundamentals of investment still hold true, even after Friday’s historic ‘Leave’ outcome.

Remember: investments are a long term game and short term losses shouldn’t necessarily drive you to substantially change your investment approach – this should be led by your individual goals and attitude to risk. If you’re concerned about your current investment approach, or are yet to secure a contractor pension, you should obtain impartial advice from a qualified professional.

The expert’s answer is based on guidance by IFA ContractorMoney.

Monday 27th June 2016