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Author: Internal Customer Services Agent
The crash of the pound
Editor: This article was written in Jan 2016.
In recent months the value of the pound has dropped at an alarming rate which has had a crippling effect on the amount British tourists will receive when converting to other currencies such as the dollar. As a result tourists wishing to travel across the pond to visit some of the major attractions and life changing destinations the United States has to offer, will have to do so with less ‘cash’ to spend. This is particularly so compared to only a year ago when the value of the pound was a considerably different value compared to today’s picture. A recent report by a top Travel Agency suggests that 2016 is the year where many Britons count the US as their top desired travel destination. To put this into perceptive, back in the year 2014 the pound would have gained a holiday maker a solid $1.75 to spend in some of the most popular holiday destinations such as Florida and New York, meaning a spending money allowance of £1000.00 would have equated to an impressive $1750.00; the highest value seen this side of the financial crisis. Whilst the value of the pound and all currencies around the world often fluctuate over time and by nominal amounts, a notable shift in the value of a currency such is the case with the pound now, can have rippling effects around the world economies.
At its current value the pound will convert to $1.42 which seems to be result of two specific factors. The first of which is the currently looming possibility that Britain could very well vote to exit the euro. This will of course have a number of different effects, with arguments of both a positive and negative nature, and not the main topic of discussion here but the point being this yet to be decided factor is causing an impact on the value of the pound today. The second contributing factor is the Bank of England Governor Mark Carney declaring that interest rates will not be rising any time in the near future. The combination of these two factors mean that the pound is currently steadily and consistently dropping in value compounded to the US dollar. This is coupled with the fact that many financial experts are predicting that the reality of the situation is that the pound will in fact continue to decrease in value against the dollar, with one specific expert declaring that the pound is an a multi-year low against the dollar as a somewhat direct result of Mr Carney’s comments concerning interest rates. Today, the value of the pound against the dollar is actually the lowest it has been since the year 2010, some six years ago. It was only a few years before this, in 2008, when the pound would convert into a hearty $2.00 and has not been seen at its current rate of $1.42 since the depths of the last financial crisis back in 2009.
To put this into context for holiday makers looking to travel to the States for their dream holiday, the figures are in reality quite alarming. In today’s market place, a family travelling with £500.00 holiday spending money would be travelling with $710.00. Which given a meal out for a family of 4 could set you back a reason $100.00, would mean the £500.00 taken would be a stretch to cover food for a week. This drop in value can be felt by consumers using their dollars not only for practical elements of their holiday but also the pleasurable parts too, such as the purchase of goods and gadgets. Whilst in the past buying the likes of mobile phones and tablets could have seen savings be made for the British tourist, in today’s market this is far less likely to be the case. An example of this is the current cost of an Apple iPad in the US being $499.00 compared to £399.00 here in the UK, making the actual saving minimal and almost non-existent when factoring the cost of travel arrangements etc to reach the destination in the first place.
The good news for consumers following this drop in value is that 2016 is expected to be one of the most competitive yet for travel providers, such as Thomas Cook and Thomson, with many of the key players offering sales and great deals already. These extend from straight forward money off to allowing children to travel and stay for free; therefore allowing consumers to gain back value for money where it would have otherwise come from the strength of the pound solely. As the year progresses the state of the pound and its coming value remains somewhat unknown but the desire to keep the travel industry and the millions of pounds it makes alive will allow consumers to obtain real deals and offers which may have otherwise not have been on offer in previous years.