Interest rates to remain at record low for at least another year
Back on the 25th January we expressed our opinion that interest rates would not increase until April 2015. Yesterday the Governor of the Bank of England explained how they would be taking into consideration a number of economic factors before making any changes to the Bank of England base rate of interest.
The main economic statistic is the level of unemployment, which has reduced faster than expected, and is now close to the level that was previously believed could trigger a rise in interest rates. Mark Carney said that although the economy was now improving and growing well, it was still not strong enough to justify a rate increase. Indeed an increase at this time could actually prove to be rather damaging.
When rates might change explained
In addition all the talk of figures and speculation about when interest rates might rise has caused much confusion and is preventing some people from spending money. Putting off home improvements, buying a new car, going on a luxury holiday, are all types of expenditure that can help the economy grow. In order to help clear confusion and explain what is likely to happen regarding the Bank of England base rate of interest, Mark Carney stated that interest rates are likely to remain at their current level for at least another year. He added, when they are eventually increased this would be done very gradually. It is estimated that by 2017 they may only have risen by a maximum of 2%.
Savers making alternative investments
This is obviously good news for borrowers and most businesses, but not for savers. This is why more and more savers are taking their money out of deposit accounts and investing in property or other investments. This is typically through investing in the rental market as buy to let rates are fairly low, and rents are high. This along with rising property values is providing great returns in investment.
Bigger risks can mean greater rewards
Some more adventurous investors are providing money to bridging companies to give them the capital they require to fund bridging loans. These are usually small lenders who have to pay a healthy rate of interest to their investors and also build enough into each loan so they also make a profit. At KIS Bridging Loans we tend to arrange facilities through the small number of banks and mortgage providers who offer bridging loans. These lenders offer much cheaper interest rates because they obtain their funds at a much lower rate than these other bridging companies.