The 5,364 Loughborough Savers batten down the hatches with low interest rates set to continue into the 2020’s
You
might ask, what has the plight of the Loughborough savers to do with the Loughborough
Property Market … everything in fact.
Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy
Committee in early August to cut the Bank of England base rate to an all time
low of 0.25 per cent, savers should prepare themselves for interest rates to
stay low well into the early 2020’s.
... And this isn’t some made
up story to capture the headlines of newspaper editors. The yield (posh word
for interest rate or return) on 10-year Government bonds is currently 0.61 per
cent. This indicates that the money markets believe that the Bank of England’s
base rate will, on average over the next ten years, be below the 0.61% rate
they are buying the 10 year bonds at (because they would lose money if the
average was over 0.61%). UK Interest rates are going to be low for a long time.
For those who have saved
throughout their working lives and are looking for ways to maximise their
savings, tying their money into property could prove advantageous. You see as a
saver, I did a search of the internet and the best savings rate I could find
was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £200,000 nest
egg would earn you £5,000 a year – not much. However, on the other side of the
fence, growth in Loughborough house prices and princely buy to let yields have
made property investment in Loughborough an appealing option for many. According
to my research, the...
Average Yield over the last five years
for
Loughborough Buy to let property has
been 5% a year
… and average Property Values
in over the same period have risen by 16.8%.
Using these averages, the Loughborough
landlord’s property would be worth £244,000 and they would have received a
total of £50,000 in rent – making the total return £294,000. Meanwhile, whilst
our 5,364 Loughborough Saver’s,
using the average savings rates for the last 5 years, even if they had
reinvested the interest, their £200,000 would only be £221,184.
There are risks as well as
benefits to buy to let though. As my blog readers know, I tell it like it is
and investing in buy to let means locking up capital in a property that may
fall in value. Another option would be stock market income based
investment funds, which are paying around 5%, especially if put your nest egg
into a tax free Stocks and Shares ISA. Although you can only add £15,240 a year into an ISA, but you would also
have the ability to sell up quickly if you want ... but one last thought…
If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call me on 01509 260777 or email me james.loughborough@belvoir.co.uk
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