We guess that most readers will have worked out the basics of the mini budget presented by Chancellor of the Exchequer, Kwasi Kwarteng last week and how this will affect them personally. We think that one unforeseen consequence was the virtual collapse of Sterling due in part to the historic high levels of UK borrowing outlined in the budget speech. Recently we published two articles relating to inflation but these primarily concerned themselves with energy costs and the impact on prices in general. We concluded that timeshare maintenance fees for 2023 will reflect rises and gave our reasons but at the time of writing we could not have envisaged the massive drop in value of Sterling. Given this fact, how will this affect timeshare?
Inevitable maintenance fee rises
Of the approximately 650,000 timeshare owners in the UK, the vast majority own their timeshare in foreign resorts, mainly Spain, the rest of Europe but also the USA. Costs associated with running these resorts are of course funded in local currency.
In early September the pound purchased €1.17, at the date of writing one pound will buy €1.10. As for the Dollar, in Sept last year the Pound Dollar was $1.38, today $1.07. Whilst financial pundits are guessing that exchange rates will settle back to normal levels, the question is if and when.
With maintenance fee invoices just over the horizon, owners may need to be prepared for a double whammy. First the general increase in costs due in the main to energy prices but the second rise directly attributed to sterling weakness.
In general timeshare maintenance fees always seem to rise, this is simple to understand as in the world we live in, very few costs and expenses seem to go down so rises in fees should be expected. Factor in unstable currency exchange rates and it becomes plain to see that 2023 fees may well bear a larger rise than normal.
Unaffordable expenses
Although we mainly focus on timeshare in this article, it must be remembered all the above mentioned personal financial pressures and volatile exchange rates also have a significant impact on every day expenses. Much of the day to day produce we consume is imported, other countries are experiencing financial pressure as well so prices will rise, given this, previously taken for granted expenses will have to be discarded as they become unaffordable, will holidays suffer as well?
Home buyers will also have to take into account that monthly mortgage repayments will go up, another rise in the household list of expenses.
Holidays
We asked the question above relating to holidays. If a holiday becomes unaffordable then unfortunate as it is, don’t take one. Bear in mind that if it’s a foreign holiday the cost of eating, drinking and entertainment will also rise due to the current weakness of sterling.
For the timeshare owner, whilst actually going on holiday may have to be shelved, the annual maintenance fee waits for no man. To a certain extent it becomes irrelevant as to how much 2023 maintenance fees will rise to and how much the demand will be for, by virtue of the terms and conditions of the purchase contract, the annual fee must be paid. To many timeshare owners who can’t actually afford to holiday, it would appear that paying maintenance is paying for a holiday that can’t be taken, whilst technically this isn’t correct, it’s an understandable sentiment.
Another point for consideration is the forecast rises in interest rates. If timeshare is purchased with finance with variable interest rates, there must be an expectation that repayments will rise. Add these two factors together and the prognosis for timeshare ownership currently is not looking good.
TCA comment
Certainly not for the first time but is now maybe the moment to question the validity of ongoing timeshare ownership. Of the current problems experienced by timeshare owners including the struggle to find availability, a general failing of the exchange platforms in satisfying holiday requirements and the exclusivity of timeshare resorts almost extinct, maybe it’s time for a rethink. Of course one thing not mentioned as part of a rethink is this years, next years and forever the requirement to pay rising maintenance fees, at least whilst still an owner.
With many European developers either scaling back or completely closing new sales divisions, maintenance fees have, and will be the sustaining life blood of corporate profit. From this the expectation of annual rises in the cost of maintenance fees must be both understood and accepted, at least whilst still an owner.
Over time, interest rates will drop, inflation will go down and currency exchange rates return to a semblance of normality but in the short term we must all be prepared to tighten our belts. Unfortunately for timeshare owners whilst juggling with family expenses to make ends meet don’t forget to put aside sufficient to pay the maintenance fee bill that will arrive in a few short weeks time, certainly an unwanted early Christmas present for many.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk