Interest rates to fall further

Interest rates to fall further

Little did I expect interest rates to stay at 0.5% for more than a couple of months back in the dark days of March 2009.  If I had perhaps I might of been a little bit more chilled out as the financial crash and chaos unfolded taken a fair bit of my investments and savings with it.  My one saving grace during the whole unerving financial melt down was that suddenly I was making big rental profits as most of my tracker mortgages hit the floor.  A good 50% now because the rate was linked to the Bank of England Base rate are still less than a hundred quid a month on properties that I'm able to charge £350+ a month rent.  It's pretty easy to do the maths.

I am therefore, licking my lips at the prospect of a further cut in the base rate down to 0.25% or even zero as a result of Brexit.  There is even talk of negative interest rates perhaps in the future.  Would that mean the banks and building society paying me for my mortgage.  Clearly that would be a step too far.

Longer term worries on interest rates

All these low interest rates sound great in the short term however they do mask the real problem that could be a massive structural global problem of lack of demand for goods and services.  Despite money being cheap not enough people want to saddle themselves with debt (sensibly).  The result in this cycle of low demand and low growth you just need to look at Japan which is still trying to escape from it's massive economic and credit boom in the 80s over 30 years ago.  The problem is across the world is that an aging population means risk adverse, caution consumers who pretty much have most things they need and want.  These people also tend to be savers rather than spenders.  The one saving grace in all of this is that one of the areas where we still seem to be unable to produce more of is housing resulting in a big shortage.  This can only be good news for landlords and perhaps means that we are in one of the few sectors of the economy which is growing and where demand outstrips supply.  In the short term I'll happily take another cut in interest rates hopefully announced by the MPC today.

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