A Complete Lack of Interest

Every month the monetary policy of the Bank of England meets to decide the official interest rate for the coming month. To no one’s particular surprise the Bank decided to leave interest rates unchanged for the fourteenth month in a row at a 0.5%.

The reason for the interest rate being kept so low is to make borrowing cheaper, which it is, and to make it easier for people to deal with their mortgage repayments. In fact, mortgages are so cheap at the moment that the deal on offer from Santander is widely argued to be the cheapest since records began.

The other side of the coin, of course, is that low interest rates mean that getting a good rate on a savings account is close to impossible. The average rate on a savings account at the moment is just 0.6% and there is no sign of that going up in the near future as there is no sign that the Bank of England is going to put its base rate up any time soon.

There are, however, two major problems looming on the horizon. The first is that the uncertainty of the election result may cause the markets to get somewhat jittery, this has already happened and they bounced back on the new economic package agreed by EU finance ministers, if they drop again, the Bank will be running seriously low on its list of standard responses to economic hardships.

The second is inflation, when inflation goes up the standard response of the central bank is to raise the interest rate, except, at the moment they can’t raise the interest rate for fear of derailing the economic recovery. If inflation takes a genuine grip, then there is going to be trouble ahead, particularly as inflation is already so significantly higher than the rate of interest on savings accounts.

Still, the economic recovery is continuing and house prices are beginning to inch higher. The collapse in the property price bubble meant that a lot of people found themselves in negative equity, but it also meant that if you had the money to invest in a house you were guaranteed to get a good deal and a good return in a few years. Prices are slowly recovering, but they’re still very low, so if you can get into the property market, now is a great time to do it.

Category: Property For Sale