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How Brexit deal will affect your finances – From the pound, holidays and food prices to interest rates
THE historic Brexit deal between the UK and European Union has today been passed by MPs - but what does it mean for your finances?
Boris Johnson saw his last-minute deal rubber-stamped by ministers this afternoon before it comes into force from January 1.
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MPs voted by 521 to 73 in favour of the Brexit trade deal.
It came just hours after the EU signed off the deal their end - and sent a copy on an RAF plane back to Britain for Mr Johnson to sign too.
The trade agreement will allow us to trade freely with the EU without tariffs or quotas and brings to an end four bitter years of Brexit wrangling.
Exactly what this means for your finances depends on the finer details of the pact.
Here, we take you through how the deal may affect the cash in your wallet.
It came as:
- A Downing Street press conference is expected this afternoon
- The Oxford University/AstraZenca vaccine was approved by regulators today - with a million doses a week to be rolled out from next week
- And a change in strategy is expected to take place so people can get the vaccine sooner - with ministers to prioritise the first jab and give the second within 12 weeks
- More than 53,000 cases of the virus were reported yesterday
- A major incident was declared in Essex over Covid as hospitals struggle to cope with demand
- School pupils in some years are likely to be delayed to returning to the classroom thanks to the spike in cases
How will a deal affect the pound?
The pound rose ahead of a deal being secured and was today up 0.38% against the euro shortly before MPs voted.
The pound at 2.40pm was at 1.10 versus the euro, and 1.35 against the dollar.
A stronger pound means holidaymakers will get more travel money when they go abroad as the exchange rate is better.
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The Bank of England warned earlier this month how "sterling would retreat" if the UK left without a deal.
It's worth remembering though, it's still 10% down compared to what it was on the day of the EU referendum 2016.
The pound slumped by 15% following the results which saw Brits vote to leave the bloc, trading at a 30-year low against the US dollar and other currencies.
How will a deal affect holidays?
Aside from getting a better exchange rate for your travel money, Brexit will have an impact on your holiday, particularly for travel insurance.
Earlier this month, the government said travellers visiting the EU who need ongoing, routine healthcare treatment will have it paid for up to a year after we leave the bloc, even in event of a no-deal.
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Even so, some experts warn that policies could become more expensive.
Currently, UK citizens can get cover for medical costs when visiting a country inside the EU with the European Health Insurance Card (EHIC).
These cards enable the holder to access treatment at the same cost as locals - so if it's free for them if it's free for you, and if they pay then you pay the same rates.
After the Brexit transition ends on 31 December 2020, UK travellers can continue to use their EHIC card, which can last up to five years, until its expiry date.
But access to this scheme is being phased out, with plans for a successor to be announced.
The UK government says the new card will be called the UK Global Health Insurance Card (GHIC), but there are no further details yet on how to obtain it.
EHIC holders will also no longer be covered in Iceland, Liechtenstein, Norway or Switzerland from January 1.
It means the cost of insurance is likely to stay the same while these cards remain in tact - but it's unclear what will happen after.
It comes as holidaymakers are already facing more expensive holiday cover due to the impact of the coronavirus pandemic.
In addition, new Brexit rules will require Brits to have at least six months validity on their passports, and animal owners to subject pets, including cats and dogs, to EU blood-tests before travelling.
Brits will also be advised to check their mobile phone provider's roaming policy, as free coverage may end.
How will a deal affect food prices?
Food prices should not be affected by Brexit now that a deal has been drawn up.
The UK and the EU will continue to trade without having to pay tariffs on goods imported and exported between the two blocs from January 1, in a Canada-style deal.
These taxes are slapped on products imported from other World Trade Organisations.
The PM said: "If anything, a deal will allow exporters to do even more business with our EU friends."
British trucking firms, supermarkets and other businesses had warned that food prices could rise from 2021 if a trade deal wasn't agreed.
Here's how to cut the cost of your grocery shop
SAVING on your shop can make a big difference to your wallet. Here are some tips from Money.co.uk about how you can cut the cost of your shopping bills:
- Write yourself a list – Only buy items that you need. If it isn’t on your list, don’t put it in the trolley
- Create a budget – Work out a weekly budget for your food shopping
- Never shop hungry – you are far more likely to buy more food if your tummy is rumbling
- Don’t buy pre-chopped veggies or fruit – The extra they’ll charge for chopping can be eye watering
- Use social media – follow your favourite retailers to find out about the latest deals
- Be disloyal – You may want to go to different stores to find the best bargains
- Check the small print – It’s always worth checking the price per kg/lb/litre when comparing offers so you’re making a like for like decision as a bigger box won’t necessarily mean you get more
- Use your loyalty cards – Don’t be afraid to sign up to them all. They all work slightly differently – work out what bonus suits you better and remember to trade in your points for additional rewards
How will a deal affect house prices?
It's too early to say how a deal will affect house prices - experts have been divided for some time now on what Brexit means for the market.
But it's generally agreed that prices will fall in 2021 regardless of whether the UK left with a trade deal in place.
Over the summer, the housing market has experienced a mini-boom thanks to a stamp duty break, which is due to end on March 31.
The Office for Budget Responsibility (OBR) predicted last month that house prices will fall by 8.5% by the end of next year.
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The coronavirus crisis is also expected to push up unemployment, which will have a negative affect on property value.
Anthony Codling, founder of property website Twindig, told The Sun: "It is unlikely in our view that house price will fall significantly as a result of Brexit."
How will a deal affect interest rates?
Earlier this month, the Bank of England (BoE) warned if a deal wasn't reached, the pound would weaken, inflation would surge and growth would slow down.
This would be a devastating hit to the economy, which has already taken a battering by the coronavirus crisis.
All of these factors are taken into account when the BoE sets the UK interest rate, known as the base rate, for lending to other banks and is used as the benchmark for interest rates generally.
What is the base rate?
SIMPLY put, it’s the country’s official borrowing rate, and is the rate the Bank of England lends to all the other banks in the UK.
It is incredibly important as it a guide for lenders on what rates it can offer – and therefore impacts mortgage rates, credit cards, loans and savings.
It was stuck at record low levels for a decade because of the state of the economy after the financial crash in 2008.
It was raised back to 0.5 per cent last November, the first of what many had hoped would be three hikes within three years.
The rate went up again in August 2018 to 0.75 per cent and has been held there ever since until the beginning of March when it was slashed to 0.5 per cent again.
The shock announcement at the end of March - where it dropped to 0.1 per cent - means it's now below a level not seen since before 2016.
It affects interest you pay on loans, or receive on savings accounts.
Low interest rates are good for borrowers who will pay less interest on loans but it's a poor deal for savers who earn very little on their nest eggs.
The base rate was dramatically dropped from 0.75% to 0.25% in March amid the coronavirus crisis, and then to 0.1% a week later.
It's too early to tell exactly what impact the trade deal will have on interest rate, but it is likely to be a more stable outcome than if the UK left without one.
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