Another Week of Chaos
U-Turns
With the amount of U-Turns being performed by the Government, I'm awaiting a change in the highway code any day now!
Less than a month ago, a mini-budget was announced which introduced some of the largest tax cuts in 50 years. This sent financial markets into a spiral and left economic experts greatly concerned.
Having clearly realised this massive blunder, the previous Chancellor, Kwasi Kwarteng, was sacked by the PM after a 38 day stint in this role.
Now replaced by Jeremy Hunt, who confirmed that there would indeed be further U-Turns on the previous mini-budget, with the headline points being;
Basic rate income tax to remain at 20% rather than promised cut to 19%
Plan to cut dividend tax by 1.25% is now scrapped
Energy support will now only be in place until April, from which point targeted support should be offered to only those who need it
It is, however, worth noting that the following measures will remain;
Reversal of 1.25% National Insurance increase
Stamp duty cuts
Various business support (£1m AIA, SEIS, etc.)
Inflation Continues to Rise
It was announced this week that UK inflation for the year to September 2022 reached a staggering 10.1%, meaning that we are getting even less for our money, once again.
We are used to seeing exceptionally high inflation rates of late, but it's important to remember that the target inflation is just ~2% per year. This drastically high figure is mostly a result of the increases in energy bills, and rising food prices due to the ongoing conflict in Ukraine.
The Bank of England remain hopeful that whilst this will continue to rise again for October, it should peak at 11% and begin to fall again from there.
Mortgage Rates Rise
Despite the initial mini-budget being the main driving force for increased interest rates, and thus higher mortgage rates beforehand, these have not fallen since the new Chancellor's announcements.
In fact, mortgage rates continue to spike with the average rates for fixes hitting their highest levels since the 2008 Financial Crisis. It is difficult to predict what may happen as we continue forwards but there are clear warning signs of a housing crash.
We already saw house prices fall slightly in September, which could be a sign of things to come, or could simply be the hot market cooling off after a rapid rise over the last few years.
This will be a key area to keep an eye on if you have to re-mortgage in the coming months or are looking to buy any time soon.
Lettuce Try Again
As if there wasn’t enough going on this week, the Prime Minister Liz Truss resigned on Thursday which was likely a relief for many of us after the circus she’s been operating since being in power. However, we now have the joys of waiting until a replacement has been found.
This spurred all kinds of headlines this week ranging from the excessive pension she is now due, through to the fact that a lettuce outlasted her this week.
Whilst the pound slightly rose after this news, it is now lower again than it was at the start of the week. This comes alongside Moody’s suggestion that there are now "risks to the UK's debt affordability".
The Current Situation
Clearly there is a lot of politics to be resolved in the background, but the UK economy did need these sharp U-Turns in order to prevent further collapse of the pound, in my opinion.
I anticipate we will see more changes during the next few months, but hopefully that will be it for the large announcements that impact our pockets.
As we are heading into the darkness of Winter, I anticipate times are going to worsen for millions as the rise in energy prices really hits home and we see these high levels of inflation spread across all of our purchases.
If you have any concerns as we head into the final stint of 2022, please do not hesitate to contact us. We are always here to help with anything you may need, and have a network of experts we can point you towards.