Interest Rates and Mortgages
Okay, so the Bank of England are maintaining base rates at ½% for another month, yet again.
However, there are some commentators that believe the Bank may cut rates before the end of the year.
Now I realise a reduction in rates from ½% to say ¼% isn't really going to make much difference to whether you're winning or losing, but the psychological effect is likely to be greater than the saving to borrowers. It's only come down by say ¼%, but it's also halved and that makes people feel different. Some may also think that it can't stay like this for long so know is the time to buy and try and lock in a cheap mortgage.
It may also have a galvanising effect on savers. After all, if you're a saver with cash on deposit you are already earning very little and if rates drop even further your real rate of return, taking account of inflation, is going to get even more negative.In other words, the longer you leave your cash on deposit the more it is depreciating overtime, which of course is completely the wrong direction!
So, what might the effects of a reduction in base rates actually be?
Well of course if mortgage lenders are not lending the effects may be hypothetical.
However, mortgage lenders are lending, albeit at lower levels than in the boom years. The British Bankers Association advised that some 30,533 home loans were approved for purchases in August 2012, about half the level in August 2006 and August 2007.
Their requirements are generally more stringent as well.
However they are lending and if you fit the criteria and you can secure funding there are deals to be had and interesting opportunities to consider.
Historically property has always boomed after a bust. It doesn't always appear immediately but it does always appear eventually.
It is not just residential property prices that are in the doldrums. Transactional activity i.e. the number of sales being concluded, are also down.
For the investor this presents a rare opportunity. There are fewer buyers in the market and prices are depressed.
If you have the wherewithal now could be a very good time to strike.
Consider when the rich really make their fortunes. Invariably it is when things are bad and they invest for the future whilst ignoring those that say now is not the time, the marker will never recover, it will recover but not for years. Whilst other procrastinate, the rich, or soon to be rich, take action. See my guide for more information.
However, there are some commentators that believe the Bank may cut rates before the end of the year.
Now I realise a reduction in rates from ½% to say ¼% isn't really going to make much difference to whether you're winning or losing, but the psychological effect is likely to be greater than the saving to borrowers. It's only come down by say ¼%, but it's also halved and that makes people feel different. Some may also think that it can't stay like this for long so know is the time to buy and try and lock in a cheap mortgage.
It may also have a galvanising effect on savers. After all, if you're a saver with cash on deposit you are already earning very little and if rates drop even further your real rate of return, taking account of inflation, is going to get even more negative.In other words, the longer you leave your cash on deposit the more it is depreciating overtime, which of course is completely the wrong direction!
So, what might the effects of a reduction in base rates actually be?
Well of course if mortgage lenders are not lending the effects may be hypothetical.
However, mortgage lenders are lending, albeit at lower levels than in the boom years. The British Bankers Association advised that some 30,533 home loans were approved for purchases in August 2012, about half the level in August 2006 and August 2007.
Their requirements are generally more stringent as well.
However they are lending and if you fit the criteria and you can secure funding there are deals to be had and interesting opportunities to consider.
Historically property has always boomed after a bust. It doesn't always appear immediately but it does always appear eventually.
It is not just residential property prices that are in the doldrums. Transactional activity i.e. the number of sales being concluded, are also down.
For the investor this presents a rare opportunity. There are fewer buyers in the market and prices are depressed.
If you have the wherewithal now could be a very good time to strike.
Consider when the rich really make their fortunes. Invariably it is when things are bad and they invest for the future whilst ignoring those that say now is not the time, the marker will never recover, it will recover but not for years. Whilst other procrastinate, the rich, or soon to be rich, take action. See my guide for more information.
