With the recent news from the Governor of The Bank of England, Mark Carney, he has made the long term plans clear for the Bank of England’s base rate. This will give those that are looking at the future some certainty as what the future might hold and what the rates might look like.
Investing In Bricks and Mortar
This will give a clear message to those that are looking to investing in the UK, it will mean that borrowing will be great with low interest rates, especially for 203k mortgage, but equally savings are not going to be working as hard. The housing market is cautious because even though money should be relatively safe in bricks and mortar, unfortunately this hasn’t been the case in recent years in the UK.
March 2009 was historical for England when the bank of England dropped their rates to the lowest that they have ever been, just 0.5 per cent. They have stayed this low, and it has been welcomed news for borrowers. But without this knowledge that Mark Carney has now provided, it has been difficult to look at an uncertain future, this move will help encourage those wanting to move and businesses to prosper.
It is the first time that there has been a confirmed connection between the interest rates and the employment in the UK and this gives a base to work towards. The intended rise is supposed to happen when there have been the creation of over seven hundred thousand jobs, and this is predicted to be in three years’ time, but if at that time the economy will not benefit from the rise then this can be addressed again.
Knowing that the rates will stay low for this time will help those with mortgages, it will mean that we will not see the interest rates that the UK suffered under in the 1980’s and 1990’s. The rates might have been high but the cost of living was lower and so were the house prices. Low interest rates mean that the mortgage rates will stay low; this will help those who are on the banks, standard variable rate mortgages and the tracker mortgages. Those that are looking for fixed rate terms should now be looking at the longer fixed rate options over the three years, they should be more beneficial.
Investing in property will be easier and potentially more profitable in the UK at the present than having money in savings accounts. This is due to this base rate at 0.5 per cent, it will be reflected in the savings products that are available and they are at the moment extremely low.
So, it is difficult to be optimistic if you are a saver in the UK, you will be looking at the ISA, Individual Savings Accounts, that are available that are still holding on to slightly better interest options than an ordinary savings account. But, a borrower could repay a mortgage early by taking advantage of the low rates and paying off more capital each month, potentially saving thousands in interest payments alone.