Like everything else during the summer, the markets seem to be taking it easy. This could very quickly change with the resignation of Teresa May and the introduction of Boris Johnson as the new Prime Minister in the UK. We have recently seen record highs in the markets with global equity markets rallying 7% throughout June. Interest rates remain at zero, while unemployment rates and inflation remain low. Equities remain a preferred asset class for now over fixed income and cash, as part of a diversified portfolio. Equities will face potential damage from weakening global growth and continued trade tensions between US and China. The US economy is expected to grow at a slower rate in 2019. Earnings growth in the US is expected to be close to 3% with a forecast of 8% in the euro zone. While the first half of 2019 has been relatively positive despite a number of potential market upsets what will happen in the latter half is anyone’s guess. As always ensure you have a suitably diversified portfolio and spread risk across a range of assets, strategies, styles, currencies and ranges.
Data assessed by mortgage advisors shows that mortgage drawdowns and approvals continued to grow steadily in Ireland in the second quarter of 2019, bringing us back to similar levels seen in 2009. The volume of mortgages drawn down grew by 9% in the second quarter, matching the pace seen in the first quarter. The increased activity for house purchases was led by first-time buyers, where lending grew by 11% year on year. Lending for mover purchasers lending grew by 6%. Approvals for remortgaging have slowed significantly for the first time since 2014. With interest rate remaining relatively stable there has been less emphasis on remortgaging. Ulster Bank recently led the way with its recent cut in fixed interest rates. Bank of Ireland has followed suit, but their offering relates to “high value” lending for borrowers in excess of €400,000. Looking at the ECB, there does not appear to be any rise in interest rates in the near future. Good news for borrowers but not for savers.
SAVING FOR CHILD’S EDUCATION
It’s that time again when we need to start looking at back-to-school costs which are rising each year for families. The annual cost of primary school education is estimated to be €766 per child per annum, while in secondary school this increases to €1,629. This rises to over €8,200 in the college years.
By using an education savings plan you can maximise the Gift Tax saving for a child, by legally assigning the plan to the child, thereby making full use of the annual Gift Tax exemption limit of €3,000 from any individual (€6,000 from a married couple). Provided you stay within the Small Gifts Exemption limit, the child will not incur any Gift Tax or have their threshold reduced, either when you make the contributions or when the plan is encashed.
By starting a long term savings plan you are giving yourself peace of mind that there will be funds available to help your child to further their studies if they so wish. You will also have full control over the investment and can dictate what level of risk, if any, you wish to take. As unforeseen events can happen you will have the flexibility to vary your payments during the term.
Remember if you invest the child allowance of €140 per month from when the child is born, it could build up to a fund of over €42,000*, by the time the child reaches the age of 18. This can help to significantly reduce the burden of the inevitable future expenses. So start now!
It is important that your review your protection policies regularly to ensure that these still fit your requirements and provide value for money. Please feel free to give us a call if you would like us to review these on your behalf. We can also offer discounts on the various types of protection, so it’s is always worthwhile having a chat.