Written by 9:47 am Money & Lifestyle

Brexit and your money: what you need to know

About 7 minutes to read

Brexit. It’s been a long time coming, but on Christmas Eve 2020, the UK-EU Trade and Cooperation Agreement concluded. Days later, on the 31st December, the transition period ended. Britain officially left the European Union, ending the freedom of movement of people, goods, capital and services between the UK and EU. It was an emotional day for many – no matter what side of the debate you were on – and represents the biggest constitutional change in living memory. 

It’s fair to say that Brexit’s been a bit of a saga. Four years of political wrangling has undone two prime ministers. Debate, policy, business confidence and market activity have all been defined by Brexit since that pivotal 2016 vote. And our relationship with the EU will continue to impact the UK as negotiations extend – particularly when it comes to London’s place as Europe’s banker. 

“This is an ongoing question for financial services. It’s going to last for 18 months or two years at least,” John Liver, head of financial services regulation at consultancy firm EY told Politico

And it’s also an ongoing question for our personal money – from our savings and investments to properties and businesses. 

Personal Finance

When it comes to our personal finances, there are some new considerations thanks to Brexit. 

Let’s start with our savings. 

Savings providers tend to use the Bank of England as a lead when it comes to setting interest rates. In the wake of the pandemic, the Bank of England slashed the base rate from 0.75% to just 0.1% – and the suggestion from experts is that it might well stay at this incredibly low rate of interest for savings through to 2022. Saying this, according to Marianna Hunt and Will Kirkman for the Telegraph, the Brexit agreement has reduced the prospect of the base rate being set below zero. 

Record low interest rates should not deter savers though – we can all do with having an emergency fund in these tumultuous times, and making the most of lockdowns to further develop positive saving habits and grow our reserves. It is also particularly the case since the introduction of vaccines gives hope for an economic recovery. Low rates may continue for some time – but it won’t be forever. 

Join Our Newsletter!

Get content like this in your inbox every Friday

Spending is a slightly different matter. 

Before the agreement was signed, there were significant concerns around things like grocery costs and how shoppers could see their supermarket bill rise £3.1bn a year in tariffs without a deal. Fortunately, this no longer looks like it’ll be the case, but food prices are expected to go up whilst things like broadband rates, energy bills, car prices, and so on are also ones to watch carefully over the coming months. 

It’s also worth checking any changes with your bank – especially if you live or work in the EU. According to the Times Money Mentor, many UK banks and building societies will stop offering services to those based in the European Economic Area – this includes Barclays, Nationwide and Lloyds. It affects products from current accounts to ISAs, credit cards to savings accounts. Similarly, European banks are doing the same thing for Europeans living in Britain. 

Another change is to bank charges. Whilst the UK is ostensibly still part of SEPA (the Single European Payments Area), meaning there should be no changes to fees on things like remittances, some banks have started to charge more on sending or receiving money to or from the UK. If you need to make an international payment, it’s therefore worth checking both the forex rates and whether there have been any fees changes since December 31st 2020.

And what about our investments and pensions? 

The main point that experts keep reiterating is that investments and pensions are a long-term endeavour. The key is not to make moves in haste or panic as markets shift – whether they spiral up or crash down. 

“Stock markets are well known to dislike uncertainty,” writes Nick Green for Unbiased. “Some of that uncertainty has disappeared with the exit of the UK from the EU, but a significant amount remains. Therefore caution remains the watchword when it comes to investment choices, with a focus on spreading risk.”

Pensions are similarly invested in the stock market and there’s sure to be volatility – but losses can be short-term and markets can recover. Tricia Phillips, Money Editor for the Mirror, also notes, “Some volatility could be good for younger and middle-aged workers as their monthly pension contributions can buy more investments when prices dip, giving the chance of bigger returns when things pick up.”

Property 

Another consideration is property. In the wake of the Brexit vote, the UK market was decidedly sluggish, driven by economic and political uncertainty. In fact, the pace of property price inflation in the UK slowed sharply following the referendum, seeing just 14% growth since 2016 compared to 28% in the equivalent time period prior to the vote. London has seen an even more dramatic slowdown.

Join Our Newsletter!

Get content like this in your inbox every Friday

So what does the Brexit agreement mean for property prices?

Most experts are saying that Covid-19 will continue to have a greater impact than Brexit on the UK property market. Estate agency Keller Williams UK even said that British real estate “seems to have remained impervious to any Brexit related decline”, despite things  slowing. 

Part of this may be due to pent-up demand from both buyers and sellers, who were hesitant to commit due to Brexit uncertainty. Alleviating uncertainty, however, is a key incentive. For example, the property market benefitted from the so-called ‘Boris-bounce’  in January 2020, after the Conservative party won a significant majority in the House of Commons. This saw a growth in confidence – both domestic and international – and sharp improvement in the UK real estate market pre-pandemic. 

While Covid-19 will continue to have a bigger impact on property prices than Brexit – pent-up demand still exists as well as additional motivation thanks to the stamp duty holiday and upcoming changes to capital gains

Saying this, Katie Binns for the Times, suggests, “Most housing experts are forecasting a drop in property prices this year and the Office for Budget Responsibility (OBR) predicts an 8.5% fall by the end of 2021.” 

And what about mortgages?

When you look at the property market, lockdown saw a plummet in activity and then surged into a V-shape recovery once things reopened. Mortgages have similarly been impacted by the pandemic – with some banks reducing the number of mortgage products available in the spring and summer. This included lenders withdrawing 90% LTV mortgages, although they have subsequently been reintroduced. 

In terms of Brexit, the main question seems to be around interest rates. If rates increase, then it’s likely mortgage rates will too. This is particularly important for people not on a fixed-rate deal, as a variable rate mortgage could see your mortgage repayments go up. But of course, there are pros and cons to both. If interest rates drop, then variable rate mortgages allow you to benefit from lower repayments that a fixed-rate doesn’t allow. The Money Advice Service says it’s important for anyone with a mortgage or who is considering remortgaging to examine the pros and cons. Whilst it’s too soon for many places to offer concrete predictions on the fallout of Brexit, there’s also Covid-19 to consider, and so peace of mind may outweigh potential benefits from lower interest rates.  

Travel 

Right now, we’re not able to travel thanks to the pandemic. There were also warnings before the Brexit agreement was signed that warned of travel disruption across most forms of international transport – fortunately, this was eased after Brexit Day. 

However, the very nature of Brexit means that there are likely more questions about travel than anything else. From whether data will now cost more abroad to what new rules there are for driving in the EU, there are a myriad of travel questions for us to try and answer. 

Will I need a visa? 

As a tourist to most EU countries, UK citizens will still not need an additional visa. We’ll also be able to stay for up to 90 days in any rolling 180-day period, and vice versa for Europeans visiting the UK. Saying that, there’s soon to be a visa waiver scheme that’ll roll out in 2022. This is the catchily named European Travel Information and Authorisation System, which is anticipated to cost around £6.30 and last for up to three years. 

Don’t worry though, as long as you have at least six months left on your current passport, you won’t need to change your passport. If you do need to apply for a new passport – which will come back blue instead of red – it costs £75.50 for an adult, £85.50 for a frequent flyer, and £49 for a child. Applying online also saves you nearly £10. 

What about mobile roaming charges? 

Well, there’s good and bad news here. Whilst the ‘roam like home’ rules no longer apply to UK mobile users travelling in the EU now, most of the big phone providers in the UK are not planning to reintroduce higher roaming charges – yet. So if you’re with Vodafone, EE, O2 or Three, then you’re in luck. Of course, always check with your provider before travelling (once we can again) as there may be changes and different charges in different parts of the Euro-travel zone. 

What about flight delay compensation? 

Under EU rules, any flight to or from an EU country that is delayed by more than three hours or cancelled due to the fault of the airline company, means that you’re entitled to compensation up to £540. These rules have also been written into UK law, so once we’re able to fly again, flight delay compensation will still be available to Brits facing travel disruption. 

And what about currency? Should I be buying Euros now?

Knowing how much money to take out before a holiday is often a mix of hopeful budgeting and really good guesstimations – and when it comes to forex rates, it’s fair to say the situation is complex. In the future, the pound could well become stronger or weaker against the euro – there’s no real way to tell at this stage – so what should you do? 

Martin Lewis has suggested to worried travellers that if you’re concerned about currency moves, then one option is to buy roughly half of what you need at today’s best rate then half nearer the time. By doing so, you might ease your anxieties about not knowing whether to buy now at what feels good, to waiting when it could make things more expensive – or of course less. 

Further details on the Agreement

For more details on the Brexit trade deal – including cars, chemicals, fishing, retail, state aid, and financial services – there are a number of great resources including this handy summary from the Financial Times. Money Saving Expert also has a useful guide to what the 1,255 pages of the Post-Brexit Trade Deal means for the economy and our money. 

Join Our Newsletter!

Get content like this in your inbox every Friday


We built ikigai specifically for those who want to bring their lifestyle to the next level, by taking better care of their finances.

ikigai beautifully combines wealth management and everyday banking in one single app. And by doing so, it creates a whole new world of opportunities.

Visit https://ikigai.money to find out more.

Maurizio & Edgar, Co-Founders, ikigai

When investing, your capital is at risk.

(Visited 47 times, 1 visits today)
Last modified: 22 January 2021
Close