The Bank of England’s Monetary Policy Committee voted today to reduce the official Bank Rate to 1 percent. Thats the fifth rate cut in a row as the UK recession takes its toll. The rate cut is good news for borrowers and struggling businesses with existing loans. Savers are hit again though as the interest recieved on money in the bank goes down yet again.
I welcome the rate cuts as the interest I pay mortgages of mine seem to be getting lower and lower in the last few months. One of my mortgages with BMS is at 0.95% below base. Thats at an amazing 0.05% of interest. I think my monthly payments will probably be in the region of Â£50 a month, thats almost too good to be true! I’m also curious as to what will happen if the base rate drops again to lets say 0% then the interest on my mortgage would in theory be – 0.95% Would BMS then actually pay me every month instead?? That would be very nice!
The struggling bank may see as much as 10 billion pounds of cash from the government to ramp up mortgage lending. The Treasury has yet to make a final decision, which may also see the bank hiring new staff. Spokesmen for the Treasury and Northern Rock, which is due to unveil a new business plan in the next few weeks, could not immediately be reached for comment.
Northern Rock the first British casualty of the credit crunch, revealed that it had been forced to seek emergency support from the Bank of England in September 2007. The bank has been nationalized since early 2008 after attempts to find a private sector buyer fell through. Northern Rock has been shrinking its mortgage book and focusing on repaying a government loan since its nationalisation.
5 billion pounds of new equity would allow Northern Rock to write about 50 billion pounds of new lending, providing the capital is not eroded by bad debts. Could this be what the UK housing market is waiting for?
If Northern Rock offer sensible loans at resonable interest rates it could just be what the UK public needs.
The UK Bank of England has cut interest rates to 5.25% from 5.5% following signs that the UK economy is slowing down. The Bank needs to ensure that growth and inflation are balanced but the move today was widely anticipated by analysts after cuts in the US, where the Federal Reserve slashed its borrowing costs to 3% from 4.25%.
Even myself, I predicted that the prices would be falling. I should have put money on it, that the interest rates would fall in February. Well actually, maybe I did as the last 3-4 investment mortgages I took out were on variable rates so I should be slightly better off every month on these mortgages. A quarter point reduction in the rates would reduce the payments by about Â£25 on each of these mortgages.
Not all mortgage lenders will pass the interest rate cut onto their customers soon, limiting the cut’s impact on the economy. Some banks will not cut their rates until the 1st of the next month giving them over 20 days to make some more money from their customers.
Savers will be worst off from the interest rate cut. Most banks will pass the changes in interest paid on savings almost immediately. Isnâ€™t that nice of them?
Thats right Interest rates down to 5.5% and I’m about a week late to report this but is it really news?
The Bank of England last week dropped their base rate to 5.5% the first drop in rates in 2 years. Economists predict that rate will reach 5% by mid next year.
Save Â£21, Merry Christmas!!
On a mortgage of Â£100k the annual interest is Â£5750 at the old rate. At the new rate it would be Â£5500. Thats a whole Â£250 cheaper a year, on someones monthly mortgage payments thats a whopping Â£21 cheaper every month. Nothing really to right home about, thats less then Â£1 per day cheaper.
Interesting things are happening on the new mortgage side of things though. Confidence in lower interest rates for the near future is high. Fixed rates are falling, lenders are lowering their fat arrangement fees, things in general are looking better for investors. The best rate for investors at the moment is from..
Yup you guessed it BMS. Birmingham Midshire Solutions have released a 5.09% 3 year fixed rate with only 1.5% arrangement fee. This is THE best rate to come along in months so I bet investors will be scrambling to get it. I would love to take advantage of the new rate, but i’ve got to find a house to buy first!
As the interest rates go up do property investors still buy more investment properties or do they hold off?
As an investor myself I have to ask myself the question “should I still buy more?”. Well my answer is “Yes, of Course!” but i have to be more cautious as less deals stack up with higher interest rates.
most all the mortgage lenders have strict criteria about monthly rents needing to be about 120% of the mortgage payments. this is to protect them from over lending making sure the rent you recieve is enough to cover the mortgage and some more. when rates were lower this criteria was easily met. as rates increase this is harder to achieve on most properties.
advantages of high interest rates
there are of course always some advantages to higher rates:
more homeowners will be overstretched and may struggle with payments.
investors in a good position will be able to help these homeowners out with sell and rent back arrangements
confidence in the market may also be affected as less people can afford to buy.
this only leaves more room for cheeky offers from investors.
keep buying, speculate to accumulate!
I will definitely still be buying more properties, but i will be more careful with picking bargains.
this week i have completed on 2 purchases further adding to my portfolio and my passive income from property.
Interest rates rise again to 5.75%
The Bank of England raised its base rates yet again this month up to 5.75% this is the highest interest rates have been since 2001. This is bad news for anyone borrowing money for any reason as mortgages and loans of any type will be affected.
Many homeowners could soon be facing mortgage arrears and financial hardship as monthly outgoings will be increased by the recent rate rise. A borrower with a Â£100,000 variable rate repayment mortgage is paying Â£104 a month more than at the same time last year. Experts predict that the rates could hit 6% by the end of the year.
Most homeowners (57%) however are on fixed rate mortgages and therefore will not feel the pinch of the higher interest rates on their mortgage. until at least their fixed rate period ends and they have to remortgage. They may then find that it will be harder to get as good a deal on their home mortgage.
How does this affect investors with BTL mortgages? well as an investor myself I always get fixed rate products for as long as possible. this means that i know how much monthly payments will be for the next 3-5 years for each property. I am finding that new mortgages i take out have reduced fixed periods and increased rates. the current best rate i can get is 5.89% fixed for 2 years. not great i know.
one plus side is that as rates go up there will be more and more people wanting to sell their homes. many in financial hardship will be looking at sell and rent back solutions for their homes. as i am a part of one such company that offers these services it should be good for business.
over the last year the number of companies that offer such services have increased dramatically. there used to be about 3 or 4 companies that did these types of transactions. now a quick google search will reveal a few hundred such companies. its important for anyone looking for a sell and rent back solution to pick a reputable company that isn’t going to let them down. as a property investor myself I always aim to be fair, honest and ethical in all my dealings as i strongly believe in karma.
Could interest rates be on the up again?
My sources indicate that we will be seeing another rate rise in June to push the Bank of England base rate up to 5.75% the highest it will have been in many years. The rates are set to be coming back to below 5% by the end of the year though (i hope so!). This maybe to encorage spending for Xmas.
This could be the worst news for homeowners and borrowers since the last rate increase. I should be ok as my credit cards are mostly paid off now unless they are on interest free promotions. My mortgage(s) are for 99% of them fixed rates for a good few years.
I can remember about 5 years ago when the rates were at about 3.5%, that was the time of the last housing boom. Good times for borrowers then, bad times for savers. Predictions for the future? I wouldn’t bet on any drastic changes to the rates, but then i’m slighlty biased as i could lose a lot of money if rates go up much more and stay up.