Interest Rates

Interest rates and their effects on the property market is key, however this also needs to take into account what else is happening in the economy and abroard. These combination of factors will determine your propensity to invest depending on your level of risk.

Essentially higher rates are bad for a property investor and conversely, low rates are good. However these are relative terms. Currently in 2007 we have had here a series of rate rises which has dented the aspirations of the property investor and whilst the current base rate may not in itself seem high it is against the recent increases of property prices. Here's the latest base rate NEWS and OUTLOOK.

Historically, these rates have been all over the place. Click here to see the UK rates chart.

The late 1980's and early 1990's saw an experiment by the then Chancellors track what is now the Euro and base rates went up to 15% and then in one day down to 10%. The housing market had a fantastic period of growth very quickly which saw many people overstretch themselves and then when base rates increased, found a falling property market, which became illiquid and people could not sell. Take a look at the combined chart of base rates, inflation and house prices.

There were many motivated sellers who when they found they could not afford to move as the value of their property was less than their mortgage - negative equity - were then locked into their situation and had to stay where they were for many years before they could sell and move.

Return from Interest Rates to Investment Property Financing