Interest Rate Rise

The 0.5% Bank Rate has been at a record low since March 2009, but the cost of mortgages has been falling during that time.

The latest minutes of the Bank of England’s Monetary Policy Committee noted that lenders “did not expect mortgage interest rates to fall much further”. In fact, it said that banks’ funding costs, an important influence on mortgage rates, had risen since May and “it was possible that mortgage rates would shortly begin to rise”.

Mark Carney, the Bank of England governor, last week said that a rise in the Bank Rate was “drawing closer”.

The Money Advice Trust said this offered only a “short window” for people to organise their finances. More than a million mortgage holders have only ever owned a home when rates were falling or frozen at 0.5%.

Of course, the UK economy is performing far better than has been doing in recent years. With income growth finally outstripping inflation, consumer spending levels should be given a boost.

However, one of the problems we face is that inflation remains persistently low. Part of the reason for this has been cripplingly low oil prices, couple this with our strong currency and we’ve seen the cost of imports reduce. Because of this, The Bank of England is unlikely to raise interest rates imminently since it could push the UK into a prolonged period of deflation, which would be likely to hurt the economy to a greater extent than high levels of inflation.

Despite this, interest rate rises are coming. In 2016 they are likely to rise and, as history shows, things can change very quickly when it comes to the performance of an economy. Therefore, they may rise at a much faster pace than is currently expected – especially if the UK continues to perform so well economically.

As such, it seems logical to be prepared for interest rate rises and investors can do this through the types of assets that they choose to hold in 2016 and beyond.

Clearly, bonds are likely to become a less appealing asset, since their price moves inversely to interest rates. Similarly, for property investors the future may not be so profitable, since a rising interest rate may dampen demand for mortgages and cause the capital growth that has been a feature of recent years to come to an end.

For investors who hold considerable cash balances, higher interest rates are clearly welcome news. They should be passed on by lenders and allow savers to (at last) received a more appealing return on their investment. However, if inflation does pick-up (which the Bank of England is expecting to take place over the medium term) then the real return on cash could become negative.

What are your thoughts on the likely interest rate rise?

Ben Street Clayton Main image

Ben Street

Brentwood Lettings are pleased to present this newly decorated 2 bedroom terrace to rent in Clayton. Within…

Price: £ 575.00 pcm
Teddington Road New Moston Main image

Teddington Road

**IDEAL FAMILY HOME** Brentwood Lettings are pleased to offer this spacious 3 bedroom semi detached property to…

Price: £ 600.00 pcm
St Georges Drive Moston Main image

St Georges Drive

Brentwood Lettings are pleased to present this delightful family home which is ideally located on a quiet…

Price: £ 700.00 pcm
Honister Road Moston Main image

Honister Road

Brentwood Lettings are pleased to present this spacious 3 bedroom Semi detached property to rent in Moston.…

Price: £ 599.00 pcm
Lowton Avenue Moston Main image

Lowton Avenue

Brentwood Lettings are pleased to present this two bedroom Terraced property which is situated in the Moston…

Price: £ 540.00 pcm
Silton Street Moston Main image

Silton Street

Brentwood Lettings are pleased to offer this 2 bedroom property located in the Moston area. The property…

Price: £ 540.00 pcm
Ruth Avenue New Moston Main image

Ruth Avenue

Brentwood Lettings are pleased to present this immaculately presented 2 bedroom terraced property which is ideally located…

Price: £ 575.00 pcm

Property Management

We manage properties throughout Manchester for investors all over the world. Contact us to talk about your property

Lettings

We provide a let only service for those landlords who wish to self manage their properties

Maintenance

We provide a full range of maintenance services, from safety inspections and repairs right up to full refurbishments

Local Property Experts

We know North Manchester like the back of our hands, chat with us for all the latest news and trends in the area

Investor Tips

Being your people on the ground, we find out about the hottest and most lucrative of local investment opportunities first hand.

Advice & Support

We are available to talk about the Local Property Market and your individual properties whenever suits you, book a call with us today