Home » Economy » Interest Rate Rise – How does this affect you?
Here’s a short video and blog (below) giving you my thoughts and predictions on the latest Bank of England interest rate rise.
You can see by the graph that the base rate has been at 0.5% since 2008 and that it only dropped to 0.25% in August last year. Therefore, rising up to 0.5% again is not a significant movement. The main concern is whether this is a sign that interest rates will rise further. There is talk that we could see another rise or two within the next two or three years, making the forecasted base rate somewhere in the region of 1% come 2020/21.
This minimal rise will give savers a modest lift in their returns and anyone considering buying an annuity for their pension will see better deals. The main losers will be households with a variable rate mortgage.
Remember, rising interest rates don’t mean there’s going to be a house price crash, it could mean quite the opposite in fact. House prices typically go up with interest rate rises.
Buy-to-Let is a long term investment and natural capital growth can take a number of years to accrue. Therefore it’s imperative that your net income yields from your rental income can service the interest rate that you’re paying to your mortgage lender. If you’d like me to have a look at the numbers on your current portfolio and perhaps make some suggestions, please feel free to drop me a line.
DAVID GILES (The Property Guy), Founder of EMBARQ, Property Investment Consultant, Letting Agent, Public Speaker, Landlord, Proud Dad, Rubbish Golfer, Ten Pin Bowling Legend, Author of The Property Guy Blog