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I don’t know about you, but right now I’m losing money. I’m lucky that I was able to invest some of my savings, but from Iran, I find it very painful to open an app that tells me what’s happening with the money I’ve hidden. It’s almost as painful as the tracker on my Monzo app, which tells me how much my apartment costs every month. Why? Because, simply put, those values are going in the same direction, and it’s going down.
There is no way to be sure how deep the fallout from Donald Trump’s decision to sanction Iran last month will be. Trump took direct aim at Britain as he criticized countries with rising oil prices due to the closure of the Strait of Hormuz, saying the UK should “find its own oil”.
But panic will not help. In this week’s newsletter, let’s look at what’s really happening and what you can do instead of worrying.
Featured in this week’s newsletter:
- What does the Iran war mean for the British economy, and how is it affecting you – from the cost of living, to mortgages, saving and investing?
- Why the risks are real, but, undoubtedly, the British economy is in a better position to deal with them than 2022, when inflation rose after Vladimir Putin’s decision to start an illegal war with Ukraine. I will explain why.
- And finally, my little report from last week’s All-Party Parliamentary Group (APPG) with Housing Minister Matthew Pennycook in the House of Commons.
First, let’s talk about the economic damage caused by Trump’s decision to sanction Iran, which caused a war in the Middle East and stopped one of the world’s most important shipping lanes, the Strait of Hormuz.
Energy bills
It is expected that there will be a rise in inflation later this year as a result of the conflict because of the effect it has had on the supply of oil and natural gas (LNG). As I wrote last week, that is why the Bank of England decided to keep the interest rate at 3.75 percent.
It is thought that energy bills could rise by £332 in July and hit an average of £2,000 a year, with this economic shock factored into the price you pay to cook, heat and light your home.
It’s news that no one wants to read. However, it is important to note that since this conflict happened early in the year, the weather is not as bad as it could be, and there is a possibility that things will calm down before winter, when people rely on their heating more.
Likewise, it is important to know that Chancellor Rachel Reeves is looking at finding ways to support people struggling with their debt.
Under the same plan, more money can be put into the crisis fund (CRF), a £1bn project a year in England. However, so far, the British Labor government has ruled out any universal support of the kind brought by former Conservative Prime Minister Liz Truss in 2022.
If you can afford it, now is a great time to think about making your home more energy efficient. That could look like adding new things, new windows or even getting thicker curtains to help keep you warm in the winter. This is something I have been looking at since 2022. I live in flats and we have solar panels on the roof. That said, we’ve had trouble getting a discount on our utility bills, which we were told we’d be entitled to get back. The Government has excellent advice on what to do here.
More broadly, you will hear a lot of debate about whether we should drill for oil in the North Sea or, even, drill for gas in the coming weeks. Energy Secretary Ed Miliband’s position is that we should not and instead maintain that a transition to “clean energy” and away from fossil fuels is the only way for Britain to achieve real energy security.
Housing costs
As I reported with my colleague Callum Mason further The i Papermoney desk, mortgage rates are now at Trump’s mercy.
If you are currently trying to secure a mortgage or mortgage, that is a nightmare. And, if your fixed rate is up for renewal in the next six months, it’s important to contact a reputable mortgage broker as soon as possible to find out what your options are.
About 1.8 million homeowners are expected to exit fixed-price agreements by 2026.
This is not very fun if you are one of them. However, it is important to note that the housing market is in a better place than it was in 2022 when the “mini-budget” crisis of Ukraine arrived.
Why is that? First, because house prices have not risen as high or as fast in recent years as they were in 2020 or 2021. And, secondly, although the rise in fixed rates from 4.83 percent at the beginning of March to 5.84 percent is very important, due to the rise in the rate that we saw in 2022 that several consultants felt “chaotic” buyers with this chaos.
If the British housing market slows down because of the Iran war and fewer people buy and sell homes, that will affect economic growth and, more importantly, people’s lives, but, ultimately, what we have learned in 2022 is that the housing market is stronger than some analysts feared and it is unlikely (although not impossible) that there will be a major financial crisis after to see a global financial crisis.
Rental price
Sadly, for the millions of people who privately rent their homes in England and Wales (in Scotland, there is national rent control, which is why I’m not including Scottish landlords), if rents go up, rents can go up.
Currently, the average rental price is 3.5 percent nationwide. This means that private equity is rising faster than the price of other consumer goods.
The National Residential Landlords Association (NRLA) is warning that landlords are seeing the cost of their buy-to-let mortgages rise by around £1,100 a year because of the Iran War. The NRLA warns that many landlords cannot absorb the increased costs without passing them on through higher rents.
However, if you are a private employer, it is important to know that the Government’s Employers’ Bill of Rights will come into force on 1 May. This will give you new powers to challenge the rent increase, which you can read all about here.
Again, none of this is good. But, thanks to the new law, private tenants have more rights and secure housing than they did in 2022.
Cost of living
If inflation goes up, you can count on your salary to follow. However, because the Chancellor suspended taxes and student loan repayments until 2031 in his Budgeting at the end of last year, any increase in earnings you receive will be taxed beyond that.
This is annoying. Especially for young adults with Plan 2 student loans.
Currently, there is not much you can do about this but knowledge is power. So, don’t get caught up in your payslip.
Savings and investments
Finally, I return to my fateful meeting with my investment account. If, like me, you’re lucky enough to have some savings, remember this: investing is a long-term game. Not temporary. Volatility is, unfortunately, a feature of the global economy. However, there are things you can do, and some investments are more exposed to an Iran War than others. So, if in doubt, talk to a trusted and controlled financial advisor to find out your options.
This will be little compensation to mortgage holders. But, remember that if interest rates go up, so does the interest you earn on your savings!
Housing crisis watch
Last week, I went to APPG for leasehold changes. We heard from Housing and Planning Minister, Matthew Pennycook directly about the Labor government’s plans to change this very dangerous system of housing.
At the meeting, Pennycook confirmed that the Government will now allow new legal challenges from libertarians to delay the changes. It’s the first time I’ve heard him say that. He also confirmed that there will be new legislation to strengthen existing protections for landlords as proposed by the Tories shortly before they leave government in 2024.
Are you a story renter? I would love to hear from you: vicky.spratt@theipaper.com
What I read and watch
- I went to see the Turner and Constable exhibition at Tate Britain at the weekend. I’m afraid, as far as Constable is concerned, I’m a die-hard Turner fan. However, it was fascinating to see the works of both artists side by side as they struggled to represent Britain as the world changed and became more industrialized. Turner’s wild landscapes and seascapes truly capture an element of nature that few artists manage.
- And, for reasons I can’t explain, I decided to watch the first episode of the US sitcom, ER. I can confirm that it is still as good as ever.
Finally, watch LBC presenter Lewis Goodall’s Channel 4 Dispatches documentary on why Sir Keir Starmer has had such a turbulent leadership. It is very important to watch.
#renters #savers #landlords #panic