 Interest rates - will they, won't they? (rise, that is)
For the switched on property investor, like your good selves, what will happen to interest rates over the next few years is more than idle curiosity.
It can and will have a dramatic impact to your profits yet it's impossible to look into the future and know what's going to happen.
So with that in mind I'm going to give you a quick 30 second guide - and what my thoughts are to the 'inflation nutters' versus 'rate doves' debate:
Viewpoint 1: Why rates will rise
The 'inflation nutters' think that the measures aimed at reviving the economy - rate cuts and quantitative easing will create extensive price rises and therefore rate rises will be needed to prevent hyperinflation taking hold.
Inflation was
higher than expected again in April and 3 month LIBOR which is an indication of what rate banks lend to each other is on the rise.
The OECD academic economics institution says that UK interest rates should rise to 3.5% by the end of 2011 to combat inflation.
Viewpoint 2: Why rates won't rise
Inflation is a concern, but there are good reasons why rates will remain low
The economy is still so weak that rates need to be kept low for the foreseeable future.
These rate 'doves' appear to have the upper-hand in recent months especially since members of the Bank of England themselves expect rates to remain low for the long term.
In summary:
Well one thing to watch is 'a rate rise without a rate rise'.
This is where lenders increase buy to let mortgage rates even if bank rates stay the same.
Potential CGT rise and HIP's abandoned.
Brilliant tactical move by the government to get the housing market moving.
Concerned that not enough property was coming onto the market they decided to take decisive action and hit us with a double whammy.
1. Abandon Hips'. No upfront fees now needed to market your property so even if you're not exactly sure you want to sell your property it doesn't take much to test the market.
2. Scare everyone by suggesting CGT will rise up to 50% on non business assets meaning any buy to let you sell then rather than 18% on your profits you will be charged 50%
Now you can't say that they are not doing their bit to stimulate the housing market.
(Note: the above can be read with a hint of sarcasm or not depending on your disposition) |