I ditched my normal Thursday morning breakfast meeting today to go to Watford’s Chamber of Commerce meeting where specialist guest Alex Golledge – Deputy Agent form the Bank of England for the South East and East Anglia regions – was giving his view on interest rates.
bank of england
I was fascinated by the presentation and how different parts of the economy can effect the potential for increase or decrease in the Bank of England base rate. However doing what I do I rocked up with my property investor hat on – thinking about my landlords & investors and how I can get the most out of this presentation for them.
I went to a similar presentation 1 year ago when Alex had been invited to speak and at that time his prediction was we were close to base rate increase of 0.25%. This was backed up by the media and 12 months later I was interested in what he would have to say this year!
Alex freely admitted that the Bank of England don’t make forward looking predictions. Although did have his opinion n the subject.  What the BofE were very good at is collating retrospective information which he showed in great detail.
At the end of his presentation when he asked himself the question we all want to the answer to “When are interest rates going to go up?” his response was they were closer to an increase at this time last year than they are now.
Please note this was his opinion rather than fact.  But if I was gong to ask anyone about when interest rates might go up I’d say the best source would be someone from the bank of England!
He suggested interest rates will remain where they are for some time yet.  There are a panel of 8 at the Bank of England who make the decision on whether to increase/decrease/keep rates at the same level and recently for the first time they have unanimously voted for it to remain the same (previously it had been 7-1 for some time).
When they do go up they are likely to creep up and interestingly he mentioned the ‘normal’ rate of interest and how that perceived percentage differs depending on your age.  Some of the older generation may remember the normal rate being between 10-15% whereas the younger generation my have never experienced anything above 7% and normal is closer to 5% or indeed lower.
I was reassuring to hear that we are in unprecedented times and a normal rate could end up being somewhere around 3%.
Of course this is all good news for property investors in Watford who are trying to buy with a mortgage and will continue to be good for landlords who are sitting on record low mortgage payments.
I would still advise you work out your numbers based on a higher rate of interest coming back at some point in the future.  If you’re in property for the long term they will go back up again so make sure your investment stacks up for you when they do.