Make Low Interest Rates Work For You

Economists are predicting that the Bank of England will not raise the 0.5% base rate until the UK economy is in a more stable rate of recovery.

The base rate has been at an all-time historical low since March 2009, and according to the Centre for Economics and Business Research (CEBR), they do not feel the Bank of England will raise rates until at least 2011. But even then they feel the official rate of interest will easily stay below 2% for the next 5 years.

One of the main reasons CEBR are attributing to this hold on interests rates is the government’s current fiscal deficit. By keeping interest rates low it will: encourage further investment, halt rises in savings, boost exports and restrain import growths.

Either way, there is no real guarantee that interest rates will remain below 2% until 2014; not without it impacting on the economy somewhere else. For this reason many economists are advising homeowners and property investors alike to take advantage of these low interest rates now while they still can:

Don’t Let Your Savings Suffer: despite the base rate being on hold at 0.5%, many banks and building societies are still choosing to lower the interest rates on their savings accounts. Last month alone witnessed 27 providers cutting their rates by up to 3%.

• Instant access savings accounts have fallen from 2.86% in October 2007 to just 0.17%
• Fixed rate savings accounts too have dropped from 6.15% in 2007 to just 2.89%

If you have been afflicted by interest cuts, economists are advising to research on price comparison websites and look for more profitable homes for your money such as ISAs

Plan a Debt Free Future: if you have got debts on credit cards or loans, economists recommend using this time to pay off as much of your debt as you can. By increasing your repayments you can bring yourself closer to a debt free future. Take this scenario for example: if you have got an outstanding balance of £1,000 on a credit card that has got an APR of 16.9% and choose to only make a minimum repayment of 2% over a year that will rack up to £151.74 in interest. However increase your repayments to 4% and not only will you pay £30 less in interest, but you will slash £400 off your total bill

Make Overpayments On Your Mortgage: similar to a credit card, by making overpayments on your mortgage you will be able to reduce your mortgage term and the total amount of interest you pay. This will also work to protect the equity in your property and create a buffer again negative equity (where your mortgage debt is more that the value of your property).

Original Article

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Peter Franklin, Property Mentor Delegate

I used to believe stocks and shares were the only way forward, yet after 15 years of property investing, neither of these can compare with the sheer velocity or impact that property investment can have on your bank account. Only with property can you truly experience the power of being in control of immediate cash flow AND capital appreciation. Stocks and shares simply cannot compete. Read more