Frequently Asked Questions:
Frequently Asked Questions (Jan 2010)
Q.: Should I fix my mortgage interest rate?
If your concern is control over monthly outgoings and if you are not on a tracker mortgage rate, you should consider fixing for up to 5 years. Rates will almost certainly go up in the second half of 2010 and once that starts, it will be priced into any fixed rates. So if you want guarantees, fix your mortgage rate now and do it for at least and preferable 5 years.
Q.: Can I still lose if I invest now?
You can always lose when you invest unless you avail of a capital guaranteed option. But there is a price to pay for that; usually lower exposure and so, lower yield. You should instead approach your investment options with the view: Can I gain if I invest now and if I lose, can I afford the hit? A good adviser will help you determine your risk profile and this must include the question: Can you afford to lose it all? Once answered, an investment strategy to reflect your profile can be built; including plans to protect your investment.
Q.: Are pensions still of any real value?
Pensions are always good value; its poor fund performance and poor management of your expectation by your advisor that leads to poor value. We all want to retire at some point; so putting money aside is a no-brainer. Putting it aside wisely is the issue and a good advisor will steer you accordingly. Remember even in pension cash, you are getting up to 50% Income Tax and PRSI/Levy relief too.
Q.: Should I buy property now?
We would say no. Rents are under pressure, supply outstrips demand, finance is not readily available, interest rates will rise and property tax will come into the picture. If renting, negotiate a good rent; if you want to buy as an investment, buy in Dublin and take your time. Offer 20% below asking price; there is still wriggle room to buy.
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Q.: Will savers/depositors/borrowers be adversely affected by Anglo Irish Bank nationalisation?
A.: Nobody should be adversely affected as the Minister for Finance has committed the state to protect all clients of the bank. This means savers and depositors are safe while loans will have to be repaid in the normal manner. The likely loser will be the stock holder and this will depend on the value placed on Anglo by Price Waterhouse Coopers.
Q.: Should I fix my mortgage now that rates are low?
A.: That depends entirely on your individual circumstance. However, rates are falling and there will be value in fixing for the next few years. Talk Financial predict continued unrest in the global economy for some time as it will take time to re-build trust in the global banking system. If you intend residing where you are currently for the foreseeable future and do not plan clearing your mortgage, consideration to fix once rates fall below 2% is an option. But make sure you get a good fixed rate as the fixed version is not tied to ECB and so may not reflect ECB value.
Q.: Is it a good time to invest in equity?
A.: Certainly stocks generally appear to represent incredible value relative to previous highs. There is little doubt that some investors will do very well over the coming two years but there will also be losers. Trying to anticipate the market is both difficult and dangerous and most people who attempt it, lose. It is a good time to step into the equity market per month rather than putting a lump sum in whereby you are relying on one daysí price to recover before you make any gain. Just be careful of high charges & commission. As with all investments, determine your risk profile, expectation and your affordability.
Q.: Should I cut my losses now on existing investments?
The truth is that it is too late. The view from investment analysts and fund managers is that most of the big losses have now been seen or have been factored into stock prices. So to cash out now would likely mean you are exiting quite close to the bottom. Of course markets may fall further; this is the dilemma for all of us. If you cash out now, you will have no chance of gaining from any recovery. The advice has to be to focus on being very patient, adapt a long-term approach (5yrs +) and perhaps consider your next investment move rather than focusing too much on what has happened since 2007. If you cannot take this time because for instance you are approaching retirement or may be un-well, you really need to seek direct advice before taking action.
Please download 'FAQ January 2009' word doc Download (size 40KB)
Disclaimer
The above replies are the general opinion of Talk Financial Ltd only. We strongly urge no action without first getting direct personal advice on your circumstances. Talk Financial Ltd accepts no liability for any action anyone may take as a result of these views.
