UK Interest rise for the second month in a row.
This is the first time in over a decade. So back to back interest rate rises 0.15% and 0.25%. What's it mean for property investors?
So the Bank of England has decided to raise interest rates by point two, five. And I think really everyone knew it was going to happen. There was no surprises in the market. So I think actually, that's what was expected. Okay. And I think throughout 2022, we're going to see, you know, slow, but incremental increases, just to bring that inflation back down, and to mop up the spare cash in the that's sloshing around in the economy. Because let's face it, we've printed 40% more currency into existence during Coronavirus.
So that's got to go somewhere, it's gone into assets, it's gone into property, it's gone into things like that. So and actually, the good thing about it this time tourists has gone into people's pockets. So they've actually gone out and spent it which is great. Or actually they didn't go out and spend it, which means they've got it to spend so they've either paid back debt. So actually, it's been a pretty good thing. And you know, let's face it, we've had over 10 years now, where interest rates have been very, very low. So then going up isn't necessarily a bad thing. It's expected at all part of the cycle.
You know, so I think if you haven't had any of you been investing in last 10 years, you know, just started, and this is the first time it's happened. This is normal that let me just explain big background.
So basically, monetary policy, fiscal policy, monetary policy is raising a lot of interest rates, raise interest rates, means people pay more interest. So therefore they have to More money's coming out of the economy and going back to the Bank of England effectively. Then lowering means there's more being put in, there's more available to be spent, which stimulates so they raise interest rates to slow down the economy, and to aim for that 2% target of inflation. We're well above that right now. That, who do you believe the government figures I always find are on the low side, not the high side. And so therefore real inflation, you're feeling you? Well, it might be a bit different. But irrespective it's a constant measure, which is good. The other side is monetary policy, which is taxes and things like that, and how did the government income? So there are two things that they likely that most the time they play with? But how does it affect property this as well, quite simply, what you have to do, because we're now into a phase of raising interest rates, okay, and that's likely to continue. Who knows, for the next year or two years, okay, depending hopefully, and what they'll probably do is raise them slowly. Because if they raise him too fast, too quickly, that could shock the market, everyone stops invest here and stop spending. And then we go into this drop.
Now, if we have inflation that's going up, and economic activity going down, that's a pretty bad situation, something called stagflation, not something we want to get into. Because it's very hard to stimulate the economy in that perspective. So slow and measured is likely to be the order of the day. All right, how much? Well, I think there's two aspects, how much your interest rates likely to raise? I'm just saying a percent. I'm saying from where they were a percent.
So probably, you know, we'll get to around about 1.5. I think, you know, at the end of this, so whatever your margin is on top of that, so 1.5 might be base of England, or the Bank of England base? Plus, what's your bank's margin on top of that? Okay, that then will be your pay rate. So you need to work out your mortgages based on that. Or you need to go actually, what is the worst case of realistic worst case? And in that case, what I would say is probably work it out on 2%. Overall, so about 1.6, more, we've had point four 1.6 More, and I think if you're working on that 2%, then you should be there or there abouts.
Right, through this cycle of interest rate rises before we start to stabilise and then potentially, they'll come down, as you know, we want to stimulate market again. So that's sort of where I'm predicting, they'll go over the course of this year, and potentially next, okay. Now, anything can happen, you know, like, mostly in economics, it's really, you know, if you ask, you know, for economists for, you know, answers, you'll get five different opinions, and most of them will be wrong.
All right, there'll be the lucky one that gets a right but most of them will be wrong. So you know, take it with a grain of salt, but redo your mortgages and what I suggest is 1.6 more on whatever you're paying right now after this increase. Add that 1.6 on, can you afford it if you can't, then you need to look at your options. Whether you sell whether you remortgage to a lower rate whether you fix earlier, you know, there's lots of options, the options you have you better to take them early than to leave them to last minute and potentially not have that option anymore.
So if you want some advice, if you want some help and you know sorting out your numbers and that sort of stuff, then by all means call same and we can run the numbers for you, you know with you and basically gets you certainty so you can sleep at night which is the main thing. And that's the main reason for that 1.6 addition that we're talking about. Alright guys, have a great day live with passion, any questions?
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