Brendan Cox is having a great time messing about on the river, or the canal, depending on where he chooses to tie up his narrowboat. The 24-year-old bought it four months ago when he moved from London to Oxford.
"I couldn't afford to buy a house and I wanted to make an investment," he says. "Come winter, I'm going to sort out rudimentary central heating, because it could be a bit chilly."
Mr Cox is a press officer for Oxfam, and most of his time is spent on the Conflict campaign. He bought the narrowboat with his savings and a £21,000 loan from his parents. He is making improvements to it, and hopes to sell it when he is ready to buy a house.
Mr Cox has £7,000 in student loans from his time as an under- graduate at the London School of Economics. On the savings side he has £300 in a Co-op Isa and Co-op savings account. "I'd like to know what I should do with my savings. I don't want to invest in shares."
Mr Cox paid into a Drug-scope pension scheme for two years when he worked for the charity. He has not joined the Oxfam pension scheme. We put his case to Danny Smith, consultant at Towry Law, in Bracknell, Berkshire, Julian Warden, financial planner at Baigrie Davies in London, Trefor Owen-Jones, independent financial adviser at Buckles Investment Services in Rhyl, Wales, and Nick Breton, spokesperson for The MarketPlace in London.
BRENDAN COX, 24 OXFAM PRESS OFFICER
Education: BSc in government and history from London School of Economics; MSc in international development at London's South Bank University;
Debts: £7,000 student loan; £21,000 boat loan from parents; £2,000 overdraft;
Savings: £300 spread over Co-op Isa and Co-op savings account.
Stocks and shares: None.
Property: 50ft narrow boat called 'Sally Wheatley', on Oxford canal.
Life/health insurance: None.
Outgoings (Per month): £450 paying off boat; £170 student loans; £50 standing orders.
Solution 1: Boat
Mr Breton says Mr Cox should also be wary of looking at his boat as an investment, because they do not appreciate much in value.
Mr Warden says the narrowboat is a great idea for short- to medium-term accommodation, provided Mr Cox can tolerate fairly basic living. He needs to keep an eye on how much he spends improving the boat. There will come a point when further expenditure will not improve the value. The boat's running costs and maintenance are affordable at present, but the situation may change if there is an increase in the licence cost, or uninsured damage.
Mr Trefor Jones says the boat is Mr Cox's largest expense, including £100 per month for the license, insurance and maintenance. He will probably have to sell the boat if he wants to buy a property in the future, because his income is unlikely to be enough for a boat and a house.
Solution 2: House
Mr Warden says Mr Cox needs to pay off debts before he considers buying a house. The overdraft will be the most expensive debt, so he should pay that off first.
His student loan should be paid off within two to four years, the loan from his parents in less than four. The proceeds from selling the narrowboat should provide a deposit on a house. But Mr Cox needs to remember the costs involved in buying a house, such as stamp duty (1 per cent on a property between £60,000 and £250,000), legal costs (£800 to £900), valuation costs (£250), and basic furnishings.
Mr Smith says Mr Cox has little chance of buying a house on his own unless he is prepared to pay considerably more than the standard rate of interest to get a mortgage. His credit rating will be poor and he has considerable debt. There will be few companies willing to take such a risk.
By saving all his spare money over the next few years and building a reasonable deposit he may be able to enter the housing market in a few years.
Mr Trefor Jones says house prices in London are starting to fall and this is likely to spread to the southern regions next year, so it could be prudent to refrain from buying for two to three years. On his present salary he could obtain a mortgage of approximately £70,000 which would cost him £370 at present mortgage rates such as a two-year fixed-rate one at 3.99 per cent from the Woolwich.
Solution 3: Savings
Mr Smith says Mr Cox is likely to need immediate access to his limited savings, so he should put all his money into a cash Isa account and add to it when possible. He needs to find out whether his existing provider is offering the best rates.
Under no circumstances should he consider entering the equity market, and if he did fancy moving the £300 it should go to pay off debt.
Mr Breton says people should have at least two to three months' salary in an instant access savings account in case of emergency. A good account is ING Direct which pays 4.22 per cent interest gross. But Mr Breton advises him to try to reduce debts as quickly as possible. Mr Trefor Jones says Mr Cox should pay the minimum on his student loan because it costs only 1.3 per cent interest.
Solution 4: Pension
Mr Trefor Jones notes that Mr Cox has not joined the Oxfam pension scheme and says that, unfortunately, he is now too late to become a member of the final-salary pension scheme, which closed to new members in February. He can join a Oxfam stakeholder scheme and the charity will double a member's contribution up to 10 per cent. He would strongly recommend Mr Cox contributes at least 5 per cent of his pay, which means he will pay £71.50 net contribution and have £275 per month paid into his pension. Though he is not keen on shares, over the period until retirement this is likely to be the best return on his savings and it is likely that the stakeholder scheme will offer ethical investments.
Mr Smith says Mr Cox needs to contact his previous employers and make sure the pension providers know where he is. They have no obligation to chase him and he should not expect it simply to turn up.Reuse content