I, like many other teenagers across the country, received my A level results on Thursday 17th August of this year. Despite only receiving my AS results, meaning I will not be going to university until AT LEAST next year; many others received their A2 results, resulting in a place at a chosen university if that was the path they chose. This begs the question - Is the high costs of a university education actually worth paying?
This a is a very disputed issue, as some feel that a 'good degree' is priceless; however others have debts rising upwards of £40,000, thus consequently provides another side to the argument. Personally, going to university has been a huge goal of mine, and it will continue to be my goal until I achieve it. With this in mind, I have obviously researched the cost of attending university (particularly in the UK) and I have reached the conclusion that it is 100% cost effective. After reading an article published in 'The Sun', they claim "You shouldn't see it as a debt" which is a stance that I totally agree with. On top of this, experts on the student loan system, ie Bankers and Actuaries, claim that students shouldn't worry about having incurred such huge balances as they will earn enough in the future through their degrees to pay it back.
In terms of statistics, students in England will not have to repay their debt if they earn under £21,000 per annum. In Northern Ireland this figure is smaller at £17,775. Two conclusions can be reached from this. The first being that living costs in England must be higher than in Northern Ireland, and so results in a significant factor when AS students such as myself go to apply to university. The second being that tuition fees are cheaper in Northern Ireland than in the whole of the UK.
Overall, student loans can be a solid foundation to build your education upon. However, the debt itself may take up to 30 years to repay, and it's figures such as this that are putting many young people off going to university and taking out a loan. Despite this, a student loan can make university life a lot easier, and thus is why I feel that it is a good idea for young people such as myself.
Wednesday 6 September 2017
Thursday 3 August 2017
House prices stalling; mortgages rising
A huge number of homeowners in the UK are set to be hit by flattening house prices and rising mortgage payments, thus putting them at risk of negative equity - which is caused by the market value of a property falling below the outstanding amount of a mortgage secured on it. The stalling market in relation to house prices is likely to be hit even further due to rises in mortgage payments, which is due to a potential rise in interest rates. This has severely affected the housing market, and has made it even more difficult for first-time buyers to secure a mortgage that is fixed and secure.
However, despite the rise in interest rates, homeowners still have options available in order to save thousands of pounds on their mortgages. For example, mortgages can be reviewed and a better deal can be achieved due to fixed rates being at an all time low (E.G. Yorkshire BS offering at rate of 1.69% F over 5 years) OR mortgages could simply be paid off quicker. In order to assess the current situation of the UK housing market, house prices need to be considered. It's important to note that house prices are NOT falling, yet that they are not rising as quickly as they once were. The ONS (Office for National Statistics) claimed that house prices dipped from a 5.3% increase in April 2017 to a 4.7% increase in May of the same year. In addition to this, Halifax found that annual growth had fallen even further to 2.6%, which has been the lowest rate since May 2013.
Why is this happening? Experts claim that this slowdown is purely down to the populous not being able to afford higher prices. What does this mean? Consumers are struggling financially and are becoming less inclined to purchase houses. Will house prices fall in the future? This is unlikely to happen, as a lack of houses of the market (and being constructed) will prevent any plummet in prices.
Next, it's also key to assess the effect that a rise in interest rates will have on the market. When interest rates go up, homeowners' biggest problem is that mortgage repayments increase if they aren't on a fixed rate; which can be a major hindrance. Furthermore, a second problem for homeowners is that when interest rates rise, mortgages rise, and so people are more cautious when buying houses. This often leads to houses taking very long to sell, which leads to price reductions. This has prompted the Bank of England to take action, as they are set to meet this week (week beginning on Monday 31/7/17) in order to potentially increase the base rate from 0.25%.
Lastly, will this result in many people succumbing to negative equity? To put it simply - the answer is no. However, many people are still in negative equity from the 2008 Financial crisis, which begs the question as to whether how many people will actually suffer from this 'slump' in the housing market. To conclude, the shape of the UK housing market is not 'bad' by any stretch of the imagination, however there is potential for a crisis to happen if things were to get out of control.
However, despite the rise in interest rates, homeowners still have options available in order to save thousands of pounds on their mortgages. For example, mortgages can be reviewed and a better deal can be achieved due to fixed rates being at an all time low (E.G. Yorkshire BS offering at rate of 1.69% F over 5 years) OR mortgages could simply be paid off quicker. In order to assess the current situation of the UK housing market, house prices need to be considered. It's important to note that house prices are NOT falling, yet that they are not rising as quickly as they once were. The ONS (Office for National Statistics) claimed that house prices dipped from a 5.3% increase in April 2017 to a 4.7% increase in May of the same year. In addition to this, Halifax found that annual growth had fallen even further to 2.6%, which has been the lowest rate since May 2013.
Why is this happening? Experts claim that this slowdown is purely down to the populous not being able to afford higher prices. What does this mean? Consumers are struggling financially and are becoming less inclined to purchase houses. Will house prices fall in the future? This is unlikely to happen, as a lack of houses of the market (and being constructed) will prevent any plummet in prices.
Next, it's also key to assess the effect that a rise in interest rates will have on the market. When interest rates go up, homeowners' biggest problem is that mortgage repayments increase if they aren't on a fixed rate; which can be a major hindrance. Furthermore, a second problem for homeowners is that when interest rates rise, mortgages rise, and so people are more cautious when buying houses. This often leads to houses taking very long to sell, which leads to price reductions. This has prompted the Bank of England to take action, as they are set to meet this week (week beginning on Monday 31/7/17) in order to potentially increase the base rate from 0.25%.
Lastly, will this result in many people succumbing to negative equity? To put it simply - the answer is no. However, many people are still in negative equity from the 2008 Financial crisis, which begs the question as to whether how many people will actually suffer from this 'slump' in the housing market. To conclude, the shape of the UK housing market is not 'bad' by any stretch of the imagination, however there is potential for a crisis to happen if things were to get out of control.
Wednesday 26 July 2017
Challenges facing UK Economy
The Financial Crisis of 2008 had severe detrimental effects on the UK Economy. Since then, the UK has recovered, and the Economy has been ticking along at a reasonable pace; baring a few events which could have disrupted economic progression, for example a coalition government. Despite this relatively stable recovery, the UK has many underlying problems that, if left ignored, could inflict serious damage on the progress that has been made.
One surprising challenge on the UK Economy is actually it's consumers. This is due to the effects that inflation had on the Economy. To put it simply, a knock-on effect of inflation is that prices are rising, yet wages aren't. For example, in the second quarter of 2017, Visa's index of consumer spending recorded the weaker quarter for consumer expenditure since 2013. This shows that fault-lines are being found in the Economy, and that it is slowly falling away, unbeknownst to the general public. Furthermore, a Chief International Economist at ING (James Knightly) claims that "My immediate worry is for the UK consumer". Using my GCSE Economics knowledge, the only way that I can describe this is that due to a rise in inflation, prices have gone up, and along with wages staying the same, this has led to a DECREASE in the purchasing power of UK consumers.
A huge problem that is also facing the UK Economy is the interest rate at the current time, and the Bank of England's dilemma. Essentially, Brexit has caused inflation to increase, which requires an increase in interest rates in order to prevent companies coming into the UK for example; however it has also caused a slowdown in the Economy and diminishing consumer spending, which would require a decrease in interest rates, for example lower interest rates may encourage people to take out loans thus increasing consumer spending.
In addition to this, Productivity is an underlying, and unexpected, challenge to the UK Economy. According to Adam Chester, Head of Economics at Lloyds Bank Commercial Banking, the issue is that "Arguably the biggest challenge for the UK at the moment is productivity", or the LACK of productivity. The problem is that although people may be working more hours, the actual levels of productivity are declining rapidly, as productivity is at it's lowest since before the 2008 Financial Crisis. This also creates a knock-on effect in the Economy, as employment is currently at 4.5%, which begs the question as to WHERE GDP growth is going to come from if productivity continues to decrease.
After reading an article produced by 'Business Insider UK', they claim that a further challenge to the UK Economy is simply pessimism. Key figures relating to the UK Economy are Bank of England Governor Mark Carney and Chancellor Philip Hammond, both of which have been subjected to criticism over being 'deliberately negative about the Economy in the time since the (EU) referendum'. Mark Beck, the lead UK Economist at Oxford University claims that "the biggest threat to the UK Economy's prospects is undue pessimism about those prospects among policymakers, forecasters and commentators". Overall this is a challenge to the Economy as the division that Brexit has caused may actually create more problems than leaving the EU itself.
To conclude, the UK Economy is facing serious challenges on a daily basis. The majority of these problems have been brought about due to a rise in inflation and the decision to leave the EU, thus acting as the forces pushing over a chain of dominoes in the UK Economy. Overall something needs to be done to combat these challenges; and in my opinion MORE UNITY over decisions such as Brexit could go a long way in helping the UK Economy to recover.
Sunday 23 July 2017
Current state of the UK Economy
The current state of the UK economy can only be described as a constant 'ebb and flow'; as fluctuations in interest rates, profits and the value of the pound etc all contribute to this somewhat everlasting instability. Take profits, for example. After reading an Article produced by 'The Telegraph', they claim that profit warnings have fallen to the lowest level in 7 years, mainly due to British companies and investors fearing the worst, and preparing themselves for a poor year in terms of the economy's performance. However, profits actually performed better than expected, as only 45% profit warnings were issued in the second quarter of 2017; which has went down by almost a third within the last year.
Above is an example of the instability of the UK economy; and how this may culminate in less investment from foreign countries. It is the job of Actuarial Scientists and similar professions to evaluate the risks associated with insurance etc in the UK Economy, however this OBVIOUS lack of stability could make their job a problem. A further example which shows the weakness of the UK economy (and which helps to prove the fact that the UK is the worst performer in the EU in the opening 2 quarters) was when the Government announced that borrowing increased after the State was forced to pay a higher interest on its debt. This was due to public sector net borrowing, minus state-owned banks such as RBS and Lloyds, rising £2bn from 2016 to a total of £6.9bn. In addition to this, Governemnt debt rose by a third from 2016, as rising inflation pushed up the interest on index-linked bonds. Overall, this has lead to the ONS stating that "borrowing is up £1.9bn to "22.8bn", thus again showing that the current state of the UK economy is poor.
Why is this so? There are many reasons as to why the UK economy is performing so badly at this current time, however the list is endless. In my opinion, Brexit has had severe consequences on the Economy (I would appreciate it if you read my first blog on 'Brexit - Implications on young people'), as Theresa May has ignored various factors such as The Labour Market; which will worsen the effect that Brexit will have on the Economy. Furthermore, the general political instability may discourage people from effectively contributing to the Economy. However, it is important to note that UK politicians such as Theresa May are trying to make the best of a bad situation, as it was the public's decision to leave the EU.
To conclude, the current state of the UK economy is "bad", according to 'The Guardian'. In my opinion, the Economy needs to gain stability and tackle Brexit correctly in order to become more affluent. It is also important to focus on HOW the Economy can be improved, for example assessing the problem of global pensions and how much pensions could rise, as opposed to WHY the Economy is where it is.
A link describing global pension problem:
http://www.telegraph.co.uk/business/2017/05/26/pensions-sitting-global-time-bomb-warns-wef/
Above is an example of the instability of the UK economy; and how this may culminate in less investment from foreign countries. It is the job of Actuarial Scientists and similar professions to evaluate the risks associated with insurance etc in the UK Economy, however this OBVIOUS lack of stability could make their job a problem. A further example which shows the weakness of the UK economy (and which helps to prove the fact that the UK is the worst performer in the EU in the opening 2 quarters) was when the Government announced that borrowing increased after the State was forced to pay a higher interest on its debt. This was due to public sector net borrowing, minus state-owned banks such as RBS and Lloyds, rising £2bn from 2016 to a total of £6.9bn. In addition to this, Governemnt debt rose by a third from 2016, as rising inflation pushed up the interest on index-linked bonds. Overall, this has lead to the ONS stating that "borrowing is up £1.9bn to "22.8bn", thus again showing that the current state of the UK economy is poor.
Why is this so? There are many reasons as to why the UK economy is performing so badly at this current time, however the list is endless. In my opinion, Brexit has had severe consequences on the Economy (I would appreciate it if you read my first blog on 'Brexit - Implications on young people'), as Theresa May has ignored various factors such as The Labour Market; which will worsen the effect that Brexit will have on the Economy. Furthermore, the general political instability may discourage people from effectively contributing to the Economy. However, it is important to note that UK politicians such as Theresa May are trying to make the best of a bad situation, as it was the public's decision to leave the EU.
To conclude, the current state of the UK economy is "bad", according to 'The Guardian'. In my opinion, the Economy needs to gain stability and tackle Brexit correctly in order to become more affluent. It is also important to focus on HOW the Economy can be improved, for example assessing the problem of global pensions and how much pensions could rise, as opposed to WHY the Economy is where it is.
A link describing global pension problem:
http://www.telegraph.co.uk/business/2017/05/26/pensions-sitting-global-time-bomb-warns-wef/
Tuesday 18 July 2017
The Religion of Economics
The idea that Economics is turning into a religion is a question that has been thrown about loosely for a number of years now, in particular after the 2008 financial crisis. Take, for example, the UK; in which there are many established churches and religions that hundreds of thousands of people worship regularly. After reading an article produced by 'The Guardian', I found that people follow a more "powerful" religion, with that religion being Economics.
Whether you believe that Economics is a religion or not, it's safe to say that has a major influence on every country and it's people. This begs the question as to whether Economics is all positive, and has no flaws, or whether it actually marginalises countries based on their wealth. The financial crisis of 2008 highlighted the weakness and instability of Economics, which could also challenge it's perception as a 'religion', as Nobel Laureate Robert Lucas claimed in 2003 that "the central problem of depression prevention had been solved" through the creation of Macroeconomics. This shows that Economics as a theory (or religion, depending on personal viewpoint) has it's weaknesses, and that it isn't an idealism in society today. However, despite the obvious risks associated with Economics via Stock Markets etc, it does in fact have it's positive aspects. People and Countries put their faith into Economics, which often brings about an array of benefits. For example, in the film industry, films such as 'The Big Short' (a personal favourite of mine) depict Economists predicting the 2008 financial crisis. This shows how people can put their faith in Economics; however it also shows how important Economics is in making sure a country can sustain itself.
To conclude, the argument that Economics is a religion as opposed to a science is hotly disputed; however it is undeniable that Economics shapes the world today, as it provides the foundation for each individual country. It is also necessary to realise that people talk about Economics everyday, they base their lives around it and some people have jobs in order to study and understand it. This highlights how one might consider it a religion. Overall Economics has both negative and positive aspects, as people can either suffer or flourish at it's hands; which again shows it's rule over society.
This comes as no surprise to me, as many people worship a variety of things, for example celebrities or materialistic goods. However, the ideology that Economics presents is so compelling that societies around the world conform to it's demand. Take China for example, one of the most prosperous economies in recent years, with a GDP growth rate of 6.9% as of 2015 (2nd highest globally). China is so invested in Economics and levels of GDP etc that they have 2 separate Stock Markets, one of them being a Stock Exchange devoted to a particular city - The Shanghai Composite. I think it's fair to say that the majority of countries around the world, if not all, prioritise their economy over anything else. This evident prioritisation can be seen on the News, in the papers, being discussed through politics and plastered across the internet. For these reasons it could be argued that Economics has converted the planet to it's creed, and bends it to it's will; however this could merely be a huge overstatement as it's down to personal opinion.
Whether you believe that Economics is a religion or not, it's safe to say that has a major influence on every country and it's people. This begs the question as to whether Economics is all positive, and has no flaws, or whether it actually marginalises countries based on their wealth. The financial crisis of 2008 highlighted the weakness and instability of Economics, which could also challenge it's perception as a 'religion', as Nobel Laureate Robert Lucas claimed in 2003 that "the central problem of depression prevention had been solved" through the creation of Macroeconomics. This shows that Economics as a theory (or religion, depending on personal viewpoint) has it's weaknesses, and that it isn't an idealism in society today. However, despite the obvious risks associated with Economics via Stock Markets etc, it does in fact have it's positive aspects. People and Countries put their faith into Economics, which often brings about an array of benefits. For example, in the film industry, films such as 'The Big Short' (a personal favourite of mine) depict Economists predicting the 2008 financial crisis. This shows how people can put their faith in Economics; however it also shows how important Economics is in making sure a country can sustain itself.
To conclude, the argument that Economics is a religion as opposed to a science is hotly disputed; however it is undeniable that Economics shapes the world today, as it provides the foundation for each individual country. It is also necessary to realise that people talk about Economics everyday, they base their lives around it and some people have jobs in order to study and understand it. This highlights how one might consider it a religion. Overall Economics has both negative and positive aspects, as people can either suffer or flourish at it's hands; which again shows it's rule over society.
Thursday 13 July 2017
Inflation - FTSE 100
Inflation is one of the biggest threats facing UK investors at the current time. This is primarily due to the fact that inflation has risen from 0.3% to 2.9% in the last year, and is forecasted by Economists to rise even further over the medium term. The rise of inflation rates will have an injurious effect on income returns, since it will mean that a wide range of assets will offer dividend yields which are well below the rate of price increases, for example HSBC. This is why the FTSE 100 is worth investing in, and so provides a worthwhile platform for investors to invest, in particular those who are seeking to beat inflation in 2017 and further in the future.
Due to the FTSE 100 having a yield higher than the rate of inflation (3.8%), this equates to 90 basis points more than the rate of inflation. As such, this creates a margin of safety in the event of inflation rising even further and causing excess turmoil in the UK economy. This event seems likely, as the main cause of higher inflation has been a weaker pound. Since the EU Referendum in 2016, investor confidence in the UK has vastly deteriorated. This could have a negative multiplier effect on the UK economy, as a lack of investment could lead to less jobs, and even contribute to potential job instability. Furthermore, a lack of investment HAS contributed to a depreciation in the value of the pound, again reaffirming the fact that investing in the FTSE 100 would be a wise decision. The value of the pound is also likely to decrease even more, as the prospect of another General Election looms and Brexit negotiations continue, all could culminate in inflation rising even further.
In addition to having a yield which is higher than inflation, the FTSE 100 is also able to offer a range of variety. This is because it is made up of the 100 companies listed on the London Stock Exchange with the highest market capitalisation, and while they don't all have equal weights, together they create a significant amount of risk reduction. An example of this, which I obtained by reading an article produced by 'The Motley Fool', is that while owning a small amount of high-yielding shares may improve income returns, the reduced level of company-specific risk which the main index offers could mean it's income return is more stable and resilient. In terms of companies within the FTSE 100, the majority of them are international companies. With this in mind, and the knowledge that the pound is getting weaker, these companies will be able to boost their earnings and significantly benefit from a depreciation in sterling. They are able to do this through processes such as Globalisation, with the Headquarters of these MNCs being located in more affluent countries(such as the UK - Hence the "London" Stock Exchange) where the bulk of profit ends up. Firms such as BP and Shell are currently offering yields of around 6.5% and 6.7%, thus making them worthy stocks to invest in; however this is only possible due to the depreciation in the value of the pound.
Overall, the FTSE 100 offers rising dividends, a high yield and a mix of growth potential; and so seems to be a logical and sound means of beating inflation. Despite the FTSE 100 faltering when Theresa May called for a General Election in April 2017, it has enjoyed a major 'bull run' in recent months; and so looks to be an advantageous place to invest for the future.
Sunday 9 July 2017
Brexit - Implications on young people
Brexit. One of the most talked about topics on the News and the Internet. One of the most controversial topics at the present time. A topic which has the power to shape the future for young people such as myself.
After recently investigating the areas which voted 'remain' and 'leave', I found that 55.7% of voters in my country, Northern Ireland, voted to remain. This is contrary to the information I received via word of mouth that the majority of people who are of 'voting age' claimed to have swayed toward leave. The statistics show that people over the age of 45 generally voted to leave, while people under 45 generally voted to remain; thus proving that the younger generation wished to remain.
According to former NUS President Megan Dunn, young people will actually struggle to gain employment across Europe if Brexit were to go ahead; mainly due to the fact that "special visas" will have to be issued in order to work abroad. Dunn claims that it will "impact on your ability to acquire a job", and so deems Brexit as having a serious detrimental effect on young people.
In the worst case scenario, i.e. Brexit prompts another recession,young people will most likely suffer. This is because they will earn less due to the UK not having a buoyant economy, thus they will not be able to secure a job that they are fully qualified for, as companies will tend to go for experience in times of financial hardship.
A recent study conducted by PathMotion, a discussion platform between employees and candidates, highlighted that Managers and Executives in the top 75 UK graduate employers will lower their intake of university graduates (49% to be exact) if Britain were to leave the EU. This is critical in terms of young people gaining employment fresh from university: and could actually DIScourage foreign students from coming to various UK universities. However opposed to this, 25% of Managers and Executives claimed they would increase their recruitment levels if they were unable to hire EU graduates.
It is also commonly stated that Immigration is bad for the UK; and that economic, as well as social migrants, are to blame for unemployment problems arising in the UK. This couldn't be further from the truth. Statistically speaking, immigrants put more money into the tax system than they get out of it, with current NUS Vice-President Sorana Vieru claiming that Immigration "boosts the economy". The reality is that not all migrants come to the UK to do graduate-level jobs; yet the problem is that businesses will not want to set up and develop in the UK if Brexit were to happen. The point being made is that this will have an adverse impact on the graduate job market, and NOT Immigration.
The main reason that so many young people voted to remain in the EU was down to the economic effects it would have, and how it would affect their future, as it was revealed that Sterling is stronger in the EU. One of their main concerns was that living costs would dramatically increase, due to a potential rise in inflation. Ultimately they believed this would result in shrinking industries, thus there would be less jobs. However, it is important to realise that before Brexit talks even came into question, the UK (inc England, Scotland, Wales and NI) was not in the Eurozone. Does this mean that the UK have always been trying to distance themselves from the EU? Should people have been better prepared for Brexit? Will the UK thrive or struggle on it's own? Only time will tell whether young people will suffer or prosper from the decision made by the UK populous.
After recently investigating the areas which voted 'remain' and 'leave', I found that 55.7% of voters in my country, Northern Ireland, voted to remain. This is contrary to the information I received via word of mouth that the majority of people who are of 'voting age' claimed to have swayed toward leave. The statistics show that people over the age of 45 generally voted to leave, while people under 45 generally voted to remain; thus proving that the younger generation wished to remain.
According to former NUS President Megan Dunn, young people will actually struggle to gain employment across Europe if Brexit were to go ahead; mainly due to the fact that "special visas" will have to be issued in order to work abroad. Dunn claims that it will "impact on your ability to acquire a job", and so deems Brexit as having a serious detrimental effect on young people.
In the worst case scenario, i.e. Brexit prompts another recession,young people will most likely suffer. This is because they will earn less due to the UK not having a buoyant economy, thus they will not be able to secure a job that they are fully qualified for, as companies will tend to go for experience in times of financial hardship.
A recent study conducted by PathMotion, a discussion platform between employees and candidates, highlighted that Managers and Executives in the top 75 UK graduate employers will lower their intake of university graduates (49% to be exact) if Britain were to leave the EU. This is critical in terms of young people gaining employment fresh from university: and could actually DIScourage foreign students from coming to various UK universities. However opposed to this, 25% of Managers and Executives claimed they would increase their recruitment levels if they were unable to hire EU graduates.
It is also commonly stated that Immigration is bad for the UK; and that economic, as well as social migrants, are to blame for unemployment problems arising in the UK. This couldn't be further from the truth. Statistically speaking, immigrants put more money into the tax system than they get out of it, with current NUS Vice-President Sorana Vieru claiming that Immigration "boosts the economy". The reality is that not all migrants come to the UK to do graduate-level jobs; yet the problem is that businesses will not want to set up and develop in the UK if Brexit were to happen. The point being made is that this will have an adverse impact on the graduate job market, and NOT Immigration.
The main reason that so many young people voted to remain in the EU was down to the economic effects it would have, and how it would affect their future, as it was revealed that Sterling is stronger in the EU. One of their main concerns was that living costs would dramatically increase, due to a potential rise in inflation. Ultimately they believed this would result in shrinking industries, thus there would be less jobs. However, it is important to realise that before Brexit talks even came into question, the UK (inc England, Scotland, Wales and NI) was not in the Eurozone. Does this mean that the UK have always been trying to distance themselves from the EU? Should people have been better prepared for Brexit? Will the UK thrive or struggle on it's own? Only time will tell whether young people will suffer or prosper from the decision made by the UK populous.
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