Trump’s tariff fallout sees first-time buyer’s stocks and shares ISAs drop 29.5% | Personal Finance | Finance

A 27-year-old has claimed he may have to rent for longer than he thought after seeing two of his Stocks and Shares ISAs collectively drop by a staggering 29.5% in the past three months. James, from Warwick, told BBC’s Today programme he witnessed the value of his Stocks and Shares Lifetime ISA fall by 13%, while his regular Stocks and Shares ISA dropped by 16.5% during the fallout from President Donald Trump’s tariffs.

To boost the US economy, Trump has been slapping tariffs on goods imported from the rest of the world, with higher rates on countries with a larger trade deficit with the US. The latest round of tariffs – including a retaliatory 54% rate on China – which had responded to the initial round with its own 34% tariff on US goods sent the stock market into chaos this week. London’s FTSE 100 dropped 4.4% to 7,702, its lowest level in more than a year when markets closed on Monday. The S&P 500 has seen more than 10% of its value wiped out over the past three days.

However, the fallout is hitting people’s personal finances in different ways. With many concerned about the value of their pensions falling, the impact also extends to first-time buyers.

James told BBC Today: “One aspect of Trump’s tariffs I want to raise is the impact on first-time buyers with stocks and shares Lifetime ISAs. My ISA has dropped 13% in the last three months, which could affect me from buying a home this year.

“My normal stocks and shares ISA, which I use for long-term savings, has also dropped 16.5% in three months. Most of this decrease, around 10%, has been since Trump’s tariffs last week, so I may need to keep renting this year longer than I thought.”

A Lifetime ISA is an individual savings account designed to help people save for their first home or retirement faster. People can save up to £4,000 a year in a lifetime ISA, after which the Government will add a 25% bonus of up to £1,000 to the savings.

With a Stocks and Shares LISA, rather than earning additional interest on top of the savings and Government bonuses, the money is invested in funds to grow the savings over time. While the potential reward is greater than a regular Lifetime ISA, capital is at risk of a fluctuating stock market.

Additionally, the product’s strict criteria mean people can only withdraw the money to buy a qualifying property or for retirement. Otherwise, they face a harsh withdrawal penalty of 25%, which can wipe out the Government’s bonuses as well as people’s own savings.

Responding on BBC’s Today programme, Sarah Coles, head of personal finance at Hargreaves Lansdown said: “It’s a particularly worrying time. In many situations, for example, pensions, you can draw money from elsewhere, but when it comes to a lifetime ISA, if you’re going to draw money from elsewhere, you don’t just lose that Government bonus, you lose money of your own. So, really, that money, for a lot of people, is specifically for buying a house.

“So, your choices are looking at whether you can push back the purchase. And actually, as you come to buy, in the months before, you should be moving that money into less-risky assets. If you look at how pensions work, for example, as you get closer to pension age, often automatically, the money will move into a less risky asset.

“In the pensions world, it’s known as ‘lifestyling’. We should be doing the same sort of thing whenever we need money. The aim really is that you’re never drawing money heavily invested in shares for something you need tomorrow.”

BBC presenter Nick Robinson added: “So the advice that’s always given to people who have any money invested in stocks and shares is if you’re patient, you’re probably okay in the long term, but if you need money in a hurry, you may well take quite a big loss.”

Ms Coles said: “The patience is totally key. If you’ve got money in a pension – or a lifetime ISA – and you’re working towards something in the future, you have nothing to worry about. We see these sorts of falls all the time. You only have to look back to the beginning of the coronavirus crisis to know that we see these huge falls, and they do recover, so it is about patience.

“And it’s about regular investment. If you think again about pensions, you’re putting money in every month and you see these huge falls – but then you’re really going to benefit from a recovery, so it’s keeping your head down, not panicking about what you’re reading about.

She added: “It is worth saying, after all of the turmoil over the last couple of days, pre-trading in the US markets is looking pretty positive today. So it’s not like this is something that’s going to keep on going, we are seeing some positive signs emerge.”

Markets opened higher across a broad range of European indices on Tuesday, with the FTSE 100 up 0.9% at the open. Asian markets also opened higher, with Japan’s Nikkei 225 benchmark shooting up more than 6% after it fell nearly 8% the day before.

With this in mind, Mr Robinson pressed: “Is there any other good news we can see for people’s finances?”

Ms Coles said: “One thing concerning the markets is this possibility of a slowdown in global growth. In order to counteract that, central banks will be really looking to cut interest rates as much as possible in order to support growth.”

The markets now anticipate the Bank of England will cut rates three times this year rather than twice.

Ms Coles said: “Of course, mortgage companies will start pricing that in straight away. We’ve already seen mortgage rates start to fall, and we should see plenty of that in the coming days. So if you’ve got a re-mortgage looming and you’re worried about that mortgage rate, then this is a piece of good news because those mortgage rates should come down.”

Oil prices are also on a downward trend, which will also please people at the pumps.

Ms Coles said: “The flipside for the UK is that [oil] is priced in dollars, so when we’re buying oil in the UK, we also have to bear in mind the exchange rate. Things aren’t going so well on the exchange rate front; the pound is falling slightly against the dollar. Nevertheless, we should see oil get cheaper at the pumps, which is really good news, and it should feed through into energy prices as well.”

She added: “So, there is good news on the horizon.”