General Election result 'will impact on personal finances'

Pound coin on euro coins The election could impact on currency exchange rates

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Personal finance specialists may not be able to forecast the election result but they are sure about one thing: sooner rather than later, the next government will hit us all where it hurts - in the wallet.

Even before the new party (or parties) in power get round to any additional spending cuts, the outcome of election night could be a changing value of the pound, loss of some tax relief on pension contributions and even an unexpected rise in the cost of home loans.

Financial advisers seem especially spooked by the possibility of a hung parliament or a coalition - of whatever political combination.

"The problem with a hung parliament is that it produces uncertainty," says Melanie Bien, a director of Savills Private Finance.

"Money markets don't like this, so mortgage borrowing rates tend to rise as a result."

She suggests that anyone coming to the end of a mortgage deal who is worried about higher rates should be able to find a fixed rate for at least two years or more.

"Then, after the election result, they can decide whether or not they want to take out the fixed mortgage deal or not".

Holiday consideration

One surprise is that foreign exchange traders in the City of London are now starting to bank on the pound actually rising in value against the euro and the dollar.

Mark O'Sullivan, of Currencies Direct, says the implications of this depend on whether you were planning to buy euros or dollars, or indeed to sell assets denominated in these currencies.

"If you are looking to sell sterling and buy currency to maybe go on holiday or buy a property in the US, we would advise you to wait, as we think the pound will go higher," he said.

But the firm says anyone trying to sell property on the continent might like to act now.

"We do think the euro will get weaker as the problems in Greece continue to worsen, with a chance they could spread throughout the eurozone."

'Pension plan'

Stockbrokers at Killik and Co have already described a hung parliament as a potential "personal finance nightmare". It is a scenario which the firm thinks may have clear implications for higher earners saving for their retirement.

"Should Vincent Cable become chancellor in a hung parliament, there is a possibility that higher rate tax relief would be scrapped on pension contributions," says Malcolm Cuthbert, head of financial planning at the firm.

"My advice has to be that if you are going to make a pension contribution and you are on a high tax rate, do it now rather than later."

These are just three areas of finance where the election is likely to herald change.

All three parties have yet to spell out what their future measures and spending cuts will cost.

Clearly nobody can entirely "election proof" their holdings.

Yet it could be that acting now on a mortgage decision - or keeping one step ahead of the currency markets, could save you a pretty penny.

See this report on Breakfast on BBC 1 on Saturday 1 May and on the BBC News Channel

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