PROOF that investors in Britain will be better off under Tories ...

As Labour unveils ‘crackpot’ plan for BT, here’s...

FIRST, the good news. Over the past nine years of Conservative governments, most investors in the UK stock market have seen their wealth rise in value quite nicely – considerably more than if they had stayed in cash.

Research prepared for Wealth by investment platform AJ Bell shows that since May 6, 2010 – when David Cameron strutted into No 10 Downing Street – anyone investing in a fund tracking the performance of the FTSE 100 Index (an index comprising the 100 biggest listed companies by market capitalisation) would have almost doubled their money. An investment of £10,000 would now be worth around £19,970.

Quite a tidy return given that the nine years have for the most part been underpinned by austerity and a somewhat volatile political backdrop – two more General Elections, a Brexit vote followed by Brexit paralysis and a referendum on Scottish independence.

AJ Bell’s research also highlights that some UK investors have done much better than if they had slavishly invested in the index.

Funds investing in some of the country’s smallest listed companies have in particular rewarded investors handsomely. Indeed, as the table opposite reveals, all bar one of the top ten performing UK funds over the past nine years have had a smaller company bent. Someone investing £10,000 in fund Merian UK Smaller Companies Focus nine and a half years ago would now be sitting on an investment pot worth £45,510.

Of course, not all UK- focused investment funds have fared so well – think Woodford – and there have been a number of high profile stock market casualties along the way (the likes of Carillion and Thomas Cook). But the overriding message is that Conservative administrations have generally been good news for investors, Brexit uncertainty notwithstanding, since May 2010. And by ‘investors’, I mean those with personal portfolios spread across Isas and self- invested pensions AND anyone with a company pension – whether still in accumulation mode or in payment.

Now, sadly, on to the potentially bad news. If Labour gets into power next month – and it is a mighty if – this investment good news story could come to a shuddering (and abrupt) end.

With its big spending and high t axation plans, Labour would unnerve the UK stock market and put further downward pressure on the pound. Brian Dennehy, managing director of investment scrutineer FundExpert, says the UK stock market could fall by as much as 20 per cent if Labour wins – or there is a hung parliament.

Jason Hollands is a director of wealth manager Tilney. He also f orecasts market mayhem if Labour wins the Election. He says: ‘ Political anxieties have loomed large over the UK stock market for some time now. This is in part a result of continued Brexit uncertainty, but it is also due to the potential for a radical shift in approach to taxation and economic management under a Labour government. If Labour goes ahead and wins, investors are in for a difficult ride, especially short term.’

Hollands says many UK companies would face a Labour onslaught – comprising higher corporation tax bills and a requirement to give staff an equity stake in their businesses. He also believes increased personal taxes – especially on high earners – would squeeze consumer spending, impacting adversely on retailers and manufacturing companies.

And, of course, there is the worrying prospect of Labour taking swathes of industry back into public ownership. John McDonnell, Labour’s economic wrecking ball masquerading as Shadow Chancellor, has already indicated a keenness to nationalise the railways and water companies.

But late last week, he announced radical plans to part-nationalise BT – namely its digital arm Openreach – so as to provide every home in the country with ‘free’ access to superfast broadband by 2030.

British Broadband, the State monolith that would result from this nationalisation, would be funded by a tax on internet giants such as Amazon and Google. Although McDonnell said pension schemes with investments in BT would not be left out of pocket, not everyone is convinced. BT’s share price fell on the news, while Boris Johnson described McDonnell’s idea as a ‘crackpot scheme’.

Hollands predicts that if the idea – ‘ Corbynband’ – is ever implemented, it would have a ‘negative impact’ on BT shareholders, many of whom first bought shares in the company’s privatisation back in 1984. He also said it would ‘damage the country’s reputation as a place to invest or establish a business in’.

He added: ‘Corbynband won’t be free as there is no magic money tree out there. Past experience of nationalised companies is that when the profit motive is removed they end up being inefficient and service standards deteriorate.’

Russ Mould, investment director at AJ Bell, says the muted fall in BT’s share price on Friday suggests that ‘investors are looking at the opinion polls and taking the view that Labour’s plans will never be put into practice’. But this could all change, he says, if Labour surges in the polls. He adds: ‘BT’s shareholders could then get a bit more windy and its share price more volatile.’

Enough bad news for one Sunday?

OK. So, one positive – and one piece of advice. The good bit is that if a Conservative government is returned, the prospects for the UK stock market look promising as it would pave the way for an orderly withdrawal from the European Union. Laura Suter, personal finance analyst at AJ Bell, says sterling would be given a ‘boost’ and share prices in UK domestic companies would rally as investors – especially overseas investors – returned to the UK stock market.

The advice comes from Patrick Connolly, a chartered financial planner with Chase de Vere. He urges investors not to be panicked by Red McDonnell. He says: ‘The best philosophy is to take a long- term approach and hold a diversified investment portfolio.’ That way, he says, investors’ long-term financial plans should ‘remain on track’.

MORTGAGE borrowers anxious about the political turmoil ahead – whoever wins the General Election – should consider taking control of their biggest financial outgoing while the going is good.

Banks are falling over themselves to offer cheap home loans – with big brands such as HSBC, Barclays and Santander leading the pack with bargain rates.

David Hollingworth, of broker London and Country, says: ‘ The good news is that the market is very competitive as the banks have plenty of money sloshing around. They are really going for it with keen rates.’

Five-year fixed rates have become particularly popular with borrowers because these will carry them through potential turbulence in the medium term – whatever the colour of the next government or the impact of Brexit.

But another reason to ‘take five’ is that these deals also look good value even compared to two-year deals. The difference between the rate on a typical five-year fix and a two-year offer has been shrinking.

One of the best two-year deals costs 1.21 per cent, for borrowers with 40 per cent equity to put towards the loan, whereas its five- year equivalent is 1.49 per cent.

Hollingworth says: ‘That’s a crazily attractive price for a fiveyear rate.’

He suggests there is no point hanging around to wait for cheaper deals to come along. ‘You may trim a few more basis points off by waiting but you could end up paying more in repayments if you end up on your lender’s standard variable rate,’ he says.

With one of the best two- year deals in our table (from Santander), a borrower with a £150,000 repayment mortgage – and 40 per cent equity – could save £254 in monthly repayments by switching from a typical 4.5 per cent variable rate.

Pick the best five- year option ( also from Santander) with the same 40 per cent equity and the saving would be £235 a month – just £19 extra. One pitfall of taking a two-year deal instead of a five-year alternative is that it won’t feel that long before you have to start looking for a new loan again – and face the prospect of paying yet another mortgage arrangement fee.

It can also take up to three months to do all the legal work involved in setting up a new loan.

Meanwhile, if you don’t remortgage quickly enough you risk ending up on your lender’s standard variable rate and facing sharply higher monthly repayments.

With five-year fixed rates you can relax for longer – even though you will be paying that bit more each month.

One drawback of a five- year arrangement is if you want to move home during the period, there could be issues with transferring the mortgage to a different property – even if the loan is described as ‘portable’.

Borrowers wanting to avoid upf r ont extras when choosing a loan can look for a deal with no fees attached though the mortgage rate – and therefore your monthly repayments – may be higher.

Although most lenders will charge fixed rate borrowers a penalty if they pay off the loan before the deal has ended, they usually allow overpayments of up to 10 per cent of the value of the loan each year without penalty.

If you manage to chip away at capital over the fixed rate period this means you should have a greater choice of competitive deals when you come to remortgage as you will hopefully have more equity to play with.

Borrowers should always check for any catches behind competitive headline rates.

Some banks are offering eyecatching deals as low as 1 per cent. But these may be targeted at homebuyers only, rather than those who simply want to remortgage.

For example, Halifax is offering a two-year fixed rate at 1.05 per cent for those purchasing a property. But borrowers have to stump up a hefty 40 per cent deposit – and pay a £1,499 fee.

Homebuyers can even grab a rate as low as 0.98 per cent from Halifax – but this is a variable rate tracker deal that will automatically rise ( or fall) in l i ne with any changes to the Bank of England base rate.

To get this rate borrowers also require a 40 per cent downpayment – and pay a fee of £999.