Everyday there is speculation around whether interest rates are going to go up, down or stay the same. There are 2 questions here, a) what does it matter and b) how low can interest rates really go?
For savers and those looking to buy their first home the news of interest rates being reduced by the BoE (Bank of England) will be met with a mixture of both good and bad emotions.
Good, because for those who now have their deposit for their first home, they will be able to obtain a better rate for their new property. Equally it will mean they won’t be paying as much for their mortgage on a monthly basis, which doesn’t just benefit first time buyers but also those looking to remortgage.
However, the flip side of the coin is those who are still in the trenches saving as much as they can for their first home. In these instances, these people will most likely curse the fall in interest rates, due to the knock on effect it will have on their LISA’s and Cash ISA’s.
Why?
You have 2 choices when the BoE announces their interest rate reduction, you can either a) continue to put the same amount of money in as you were before the interest rate decrease, resulting in less interest going in or you can increase the amount you are putting to maintain the same level of interest. Better yet double it to go even harder on your home.
A reduction in the interest rate doesn’t mean that you simply stop saving, on the contrary it means you double down on your saving, It also means you research more methods to generate additional income to help you increase the amount you are putting away for you home on a monthly basis.
I used to cringe when I saw the interest rate decline, now I look at it and think how do I want to respond. I could maintain what I’m putting away, or I could add more to it to help boost the savings pot.
The important thing to do whenever there is an announcement like this, is not to panic. Don’t participate in that feeling of there is no point in trying to get on the property ladder, there is every point.
Quit panicking over whether you’re going to get on the property ladder or not and start producing more income to help you increase the amount you can put into your house fund, so you will get on the property ladder.
Robert Haylor
www.roberthaylor.com