The Bank of England’s Monetary Policy Committee has cut Bank base rate to 1%, its lowest ever level. BBR has now been cut in each of the last five months, and is 4.25% lower than this point last year, when BBR stood at 5.25%.
With the recession showing no signs of easing, most analysts expected the Bank of England (BoE) to announce a cut as it aims to help stimulate the economy, although we have not seen this happen yet.
This is fantastic news for all of us on Tracker mortgages. Who are now getting even better cash flow form our properties. Be careful not to get used to all this extra cash. Interest rates will eventually go up again so I recommend you put this extra windfall aside to save for a rainy day.
The lower interest rates have been reflected in competitive rates being offered by lenders for new mortgages , however due to liquidity issues the banks are being very fussy about who they lend money to. Many property investors want to take advantage of the current market and buy lots of property below market value but are struggling to get the mortgages. For this reason I think many investors will be looking for new ways to buy property such as purchase lease options.
Interest rates will stay low until the economy starts to pick up, which could be some time.
One of the disadvantages of the lower interest rates is that it is killing the Pound exchange rate. I sent some money over to Spain last month and was shocked when I got less than 1 Euro for each pound. It is going to be very expensive for us to go on Holiday overseas this year and so I expect there will be a boom in UK holidays this year, as people chose to stay at home which will of course help the economy.
We will have to wait and see if BoE interest rates are cut further next month.