MTTM Podcast Episode 475 – Mortgage market latest, fractional shares update & tracing old pension pots

Summary:

An in-depth analysis of the current mortgage market, focusing on the Bank of England’s recent decision to maintain the base rate at 5%. Despite expectations of a potential rate cut to 4.75%, the rate remained unchanged. However, market predictions indicate that the base rate may decrease to 4.38% by early 2025 and further to approximately 3.14% by 2028, which is favourable for mortgage borrowers. This anticipated decline in base rates suggests that fixed mortgage rates may also decrease, offering opportunities for refinancing at lower rates.

Key Insights:

• The Bank of England held the base rate steady at 5%, contrary to market expectations of a cut to 4.75%.
• Future base rate predictions suggest a downward trend, reaching around 3.14% by 2028.
• Lower base rates are expected to lead to decreased fixed mortgage rates, benefiting borrowers looking to refinance.
• The best current two-year fixed mortgage rate for a 60% LTV is 3.99%, with ongoing downward movement in rates.
• Economic factors such as inflation and potential recessions will influence future rate decisions.

Summary:

In this section we discuss the increasing accessibility of fractional shares for UK investors, especially now that fractional shares can be held within ISAs. This change allows investors to purchase smaller portions of expensive stocks, such as those in the US tech sector, thereby enabling greater diversification with smaller investment amounts. Several platforms now support fractional shares, including EToro, Trading 212, and Freetrade, while traditional platforms like Hargreaves Lansdown do not. However, investors should be mindful of associated fees and the potential limitations on voting rights.

Key Insights:

• Fractional shares can now be held within ISAs, making them more accessible to a broader range of investors.
• Platforms offering fractional shares include EToro, Trading 212, Freetrade, and others, whereas some major platforms like Hargreaves Lansdown do not.
• Investing in fractional shares allows for diversification with smaller amounts, reducing the barrier to entry for investing in high-priced stocks.
• Investors should consider trading fees and FX charges, as these can impact the overall cost of investing in fractional shares.
• While fractional shares offer flexibility, not all shares are available in fractional form, and voting rights may vary by platform.

Summary:

The final segment of the podcast focuses on pension tracing services, which are essential for individuals who have worked multiple jobs and may have lost track of their pension schemes. The UK government offers a free Pension Tracing Service that provides contact information for pension administrators, but it requires users to follow up themselves. In contrast, private companies like PensionBee and MoneyFarm offer comprehensive pension tracing and consolidation services, handling much of the legwork and some companies provide additional benefits such as guidance on suitable pension portfolios. These services simplify the process of locating and managing multiple pension pots, making it easier for individuals to consolidate their pensions into a single, manageable account.

Key Insights:

• The UK government’s Pension Tracing Service provides contact information for pension administrators but requires manual follow-up.
• Private companies like PensionBee and MoneyFarm offer more comprehensive services, including tracing and consolidating pensions.
• MoneyFarm provides additional benefits such as guidance on suitable pension investment portfolios, aiding users in making informed decisions.
• Consolidating pensions can simplify financial management, but users should be aware of fees and the nature of their pension schemes (e.g. defined benefit vs. defined contribution).
• Seeking professional financial advice is recommended, especially when dealing with complex pension schemes or significant pension pots.