Well, the Monetary Policy Committee of the Bank of England did what was expected and reduced the ‘Repo rate’ to 1.00%, a new record in the Bank’s 315 year history. What does that mean for us?

1. If we are lucky enough to have a tracker mortgage, the interest rate payable will fall by a further 0.5% as of the beginning of next month – unless the lender has put a ‘floor’ on the product. That is, a rate below which the mortgage interest rate will not fall.
2. If we have savings, we will receive hardly any money at all
3. If we have a fixed rate there will be no change
4. If we are planning on taking out a new mortgage or refinancing; hardly anything will change.

Most lenders withdrew their tracker and variable rate products in the days leading up to this week’s decision. Once the decision was announced, they started announcing new products with higher margins over the Bank Base Rate. Essentially this means that the mortgage rates are unchanged from before the announcement.

The reasons for this are now well known. Bank Base Rate (or Repo Rate) does not now influence the cost of money to the banks. This cost is driven by how accessible funds are and, with fear still the master of banker’s thinking, money costs the banks at least 1% more than the Bank Rate. Unless and until fear is eliminated, borrowers will not benefit for the Bank of England’s efforts.

• Can you now afford your new home?
• Can you now afford to move to a bigger home?
• Do you have adequate Income Protection?
• What would happen if you lost your job?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you move into that new home and get the right protection.

For further reading:

• http://www.bankofengland.co.uk/monetarypolicy/decisions/decisions09.htm
• http://www.ft.com/cms/s/2/859430e0-f384-11dd-9c4b-0000779fd2ac.html
• http://www.ft.com/cms/s/2/4c92e614-f47f-11dd-8e76-0000779fd2ac.html
• http://www.inthenews.co.uk/news/finance/bank-england-cuts-rates-by-half-point-$1266389.htm
• http://www.cml.org.uk/cml/media/press/2102

On 23rd January, the Government announced, to no-one’s surprise, that the UK was now officially in a recession. Measures taken to drag us out of the recession so far have been to:

• Make additional money available for short-term borrowing by banks so as to ease their funding needs
• Pump thousands of millions of pounds into the Banking sector, buying out debt in exchange for equity in the sector.
• Progressively and aggressively reduce the Bank of England base rate – to stimulate the economy

It is being widely predicted that interest rates will continue to fall to, perhaps, zero with another cut this week. The Chancellor is also talking about “Quantitative Easing”, which the uninitiated might be forgiven for thinking means “printing more money”. Perish the thought!

To date, very little seems to have worked and questions are being asked as to whether the present policy of interest rate reductions can, in fact, be made to work. Interest rates, on their own, seem to be the wrong tool to deal with this problem and, as we near zero, they can have less impact.

The problem is very much that banks are not lending to customers or small businesses. Specialist lenders who filled the gap in previous years are starved of cash and banks are hoarding money in case of a further crisis, thereby exacerbating the current one. Interest rates to customers are increasingly being driven by the banks willingness to lend and not by Government (or Bank of England) policy.

We need a radical re-think on how money makes the economy work. We need to reduce many of the risks banks are carrying so that they will free up their vast reserves and start lending again and at affordable rates. Maybe then we need to print more money so that this can happen. We will also need to remove that money from the economy as soon as possible so as not to stoke up inflation in the future.

The Government had better get this one right, and soon.

• Can you now afford your new home?
• Can you now afford to move to a bigger home?
• Do you have adequate Income Protection?
• What would happen if you lost your job?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you move into that new home and get the right protection.

For further reading:

• http://www.telegraph.co.uk/finance/financetopics/recession/4321414/UK-recession-Its-now-official.html
• http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4362284/Banks-bail-out-package-still-short-on-detail.html
• http://www.cml.org.uk/cml/publications/marketcommentary

Last October, it became mandatory for landlords to obtain Energy Performance Certificates prior to the commencement of any new tenancy. A copy of this EPC must be provided to each prospective tenant, Failure to do so could result in a £200 fine and the landlord being prevented from marketing the property for rent.

Landlords planning to make energy efficiency upgrades this winter are advised to make use of the Landlord Energy Saving Allowance(LESA), which is a tax allowance that enables landlords to claim the cost of buying and installing energy efficient measures against their income or corporation tax. This is up to the value of £1,500 per property.

Landlords can claim the LESA for draught proofing and loft, floor, cavity wall, solid wall and hot water systems insulation. Landlords must include the expenditure as a deduction in their self-assessment tax return to claim the tax relief.

• Have you arranged the EPC?
• Do you need financing on that BTL?
• Do you have adequate rental property insurance?
• Do you have adequate Income Protection?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you and get the right protection.

For further reading:

• www.hmrc.co.uk
• http://www.hmrc.gov.uk/ria/8-landlords-energy-saving-allow.pdf

Although the Bank of England has suggested it is prepared to cut its headline rate even further to stimulate the economy, many analysts are questioning the value of this policy. It looks more and more as though the Bank of England has run out of ideas because, despite the deep and rapid cuts, banks have not increased their lending nor have they reduced their lending rates by anything like the Bank of England’s reductions.

What is needed is for the vast sums of money injected into the banks to be made available to businesses and home-owners. That was the Government’s stated purpose and the justification for the Government taking a stake in many banks. The Government told the banks that it wanted them to start lending ‘at the 2007′ levels but, because it also told them to increase their reserves AND to pay back the loans from the Government at high interest rate, this has not proven possible.

It seems evident that new solutions are needed before confidence returns and the economy recovers. Nevertheless, having been through downturns before, we remain confident that the situation WILL improve.

Can you now afford your new home?

Can you now afford to move to a bigger home?

Do you have adequate Income Protection?

What would happen if you lost your job?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you move into that new home and get the right protection.

Further Reading:

http://www.guardian.co.uk/commentisfree/2009/jan/14/bankofenglandgovernor-gordonbrown

http://www.guardian.co.uk/commentisfree/2009/jan/08/interest-rates-mortgages

http://www.independent.co.uk/news/business/news/brown-moves-to-head-off-new-banking-crisis-1418565.html

On Thursday, The Bank of England announced that interest rates are to be cut by 0.5%, from 2% to 1.5%. This represents the lowest base rate since the Bank of England was founded in 1694. However the Council of Mortgage Lenders warned that borrowers with standard variable rate mortgages should not expect a cut in Bank rate to be matched by an equivalent reduction in their mortgage rate, as Lenders’ borrowing costs are not determined by the Bank rate alone.

The British Chambers of Commerce has suggested that unemployment figures could rise to ten per cent (3.1 million people) during 2009. For these unfortunates there may be some hope as, on 5^th January, new legislation came into force to help struggling mortgage holders who have lost their jobs. They will receive extra support from new measures outlined by the government last year, which it is hoped will stem the rising number of repossessions in the property market. Waiting periods for the means-tested benefits reduced from 39 to 13 weeks and changes to the terms and conditions of the additional help will mean more people qualify for assistance.

Can you now afford your new home?

Can you now afford to move to a bigger home?

Do you have adequate Income Protection?

What would happen if you lost your job?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you move into that new home and get the right protection.

Further Reading:

http://www.ft.com/home/uk

http://www.telegraph.co.uk

http://www.inthenews.co.uk/money

A majority of economists believe 2009 will be a year in which to avoid buying property and that prices will continue falling in 2010.

However, a significant minority think that prices will reach their low point during the year as the recession and credit constraints ease.  Some of these economists suggest that 2009 will be a good time to buy.  Others have even suggested that the house price “bounce” could be as steep as the fall.

A recent survey shows that first-time buyers will find homes more affordable in 2009 than at any time in the last five years. If - as expected - prices continue to fall, homes should become more affordable still.  Now, if only lenders will reduce the need for large deposits, this would reduce the pressure on parents and the knock-on effects would bring more mobility to the market, allowing existing home-owners to move to a bigger home.

Can you now afford your new home?
Can you now afford to move to a bigger home?

Call us on 01752 561981 for a free, no-obligation discussion of your circumstances and we’ll see if we can help you move into that new home!

Further Reading:
http://www.ft.com/home/uk
http://www.independent.co.uk/opinion/leading-articles/leading-article-good-news-ndash-for-some-1218130.html
http://www.telegraph.co.uk
http://www.inthenews.co.uk/money/property