Interest Rate and House Prices Update

On the 9th of May, the Bank of England Monetary Policy Committee announced that they're deciding to leave interest rates unchanged at 5.25%. That's as high as they have been since 2008. 

However, they've remained at this level for about the last five or so meetings. At this meeting, two out of the nine members of the board were voting for interest rates to be cut. Seven people said no, we need to leave the rate where it is because we are not sure. Still, if the reducing inflation, which is now down to 3.2%, is going to continue to come down, which is what the Bank of England expects, they do believe by the end of this year it's going to get to 2%.  

Andrew Bailey, who's the governor of the Bank of England, hasn't ruled out the possibility of a change in June. The next meeting is the 20th of June. But also, he hasn't said it's a possibility either. Many people believe August might be the first time we're going to see rates come down. And the consensus is that probably rates are going to come down three times during 2024. 

How Does This Affect Property Investing? 

The reality is there is still a shortage of accommodation. There was not enough supply. And with more and more landlords selling up and retiring from the game, there seems to be less and less rental stock available. If you have a good property in a good area, you should be able to rent it very easily. The Office of National Statistics has just released figures up until March 2024, saying over the last 12 months, the average increase in rents has been 9.2%. 

It's becoming more expensive for renters to rent property, and much of that is because of inflation, but also because of the higher interest costs that many landlords have been paying and they're passing that cost onto the tenants. 

If we look at what's happening to the actual property sales market, it looks like prices are pretty much stagnating on average. What is interesting is we are seeing that cheaper properties and apartments have had sharper growth over the last few months than other properties, maybe suggesting that people are buying cheaper properties because that's all they can afford to get mortgages for. 

Why You Should Invest Now? 

A lot of property investors are standing by the sides waiting to see what happens. They're waiting for the Bank of England base rate to come down, which is going to make property far more affordable. I can see that if rates do come down, there might be a lot of investors who jump back into the market towards the end of 2024 looking to pick up some good deals.  

“You should observe the masses and do the opposite.”

The key to adding value is that you spend money wisely. The value you add should be more than the money you have to spend. 

When everyone else is waiting, seeing what's going to happen to rates, this could be a really good time to get out and find some good deals. 

Although rates do feel relatively high, if there aren't that many buyers in the market, which is the case right now, that's why it's called a buyer's market, there are more sellers than there are buyers. For those people who need to sell, those motivator sellers for whom speed and certainty are more important maybe than the amount of money they get, there are some great deals to be had. 

Don't wait for rates to come down. Don't wait for the market to change. It could be a good opportunity for you to pick up some fantastic deals right now. You still need to do your due diligence. Make sure you've got the right people on your power team. Make sure you're following all the right processes. You've got the right strategy. You're buying the right properties in the right area. But if you do that, there are some fantastic deals out there to be had right now. 


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