Bank of England Raise Rates by 0.5%, as UK heads towards
recession
UK heading into recession say BoE, and Inflation set to
hit 13% this Autumn
Mortgage affordability rules relaxed by Bank of England
The Bank of England (BoE) has raised rates by 0.5 percentage
points to 1.75%. The news marks the biggest UK interest rate rise in 27 years.
This is the BoE’s latest attempt to calm soaring inflation
levels, which are expected to reach 13% by the end of the year as the UK faces
the biggest squeeze on living standards in 60 years.
Property transactions
are already down 55% on 2021 - https://youtu.be/Q4ycEfF7ER4
Interest rate rises should be good news for savers, right? High
street banks should pass on interest rate rises to savers? But do they? As at 30
June, despite five rate changes since the middle of December, lots of high
street banks' rates have hardly moved and many have stayed where they were
before the rate hikes started. The average market rate for instant access
accounts is just 0.31%.
Millions of savers are facing more time stuck earning almost
nothing on money held in instant and easy access bank accounts.
So, what can you do to make more of your savings?
This article isn’t personal advice. If you’re not sure
what’s right for your circumstances, seek advice.
1. Look further than your high street bank
Well-known banks often pay the lowest rates.
Some of the large high street banks currently only offer
0.2% on their instant access accounts. That’s just £20 interest on a £10,000
savings pot after a whole year.
In reality, the big banks don’t need to work as hard for your
money and don’t really care as much as smaller banks and building societies who
will offer more attractive rates to attract your money.
Protect your savings.
If you have more than £85,000 in cash with different banking
brands under the same licence, it could be sensible to move your savings
elsewhere, to maximise your protection under the FSCS.
2. Use fixed terms
Fixing your savings for a set term will increase your
returns.
3. Alternatively, invest in real assets like property.
See: 6 Tips to get on
the property ladder - https://youtu.be/F4spqKpYZo4
Learn how to get started as a first-time property buyer.
Open
House South Herts is advertising property deals in the north of the UK from
just £30,000 asking price with yields of between 10 and 15%. – see https://www.facebook.com/estateagentswatfordelstreeandborehamwood
A slowdown in the property market means more opportunities
for buyers and investor!
Mortgage affordability rules relaxed by Bank of England
The UK mortgage borrowing rules have been changed after the
Bank of England scrapped an affordability test for lenders.
The so-called "stress test" required mortgage
lenders to calculate whether borrowers applying for a mortgage would be able to
afford the loan in the event of interest rates rising by up to 3%.
The removal the test could be good news for some potential
borrowers, for instance, the self-employed or freelance workers, by helping
them to qualify for loans.
Other rules, such as strict loan-to-income limits, will not
make it more difficult for most people to obtain a mortgage.
The withdrawal of the affordability test, first announced in
June, came into effect on Monday.
There will be no immediate impact for borrowers as lenders
will not need to change the way they assess loans, but some could change their
own rules in the future.
The mortgage affordability test was introduced in 2014 as
part of a widescale tightening up of the mortgage market to ensure there were
no repeats of the mis-selling scandal that partially contributed to the 2008
financial crisis.
Lenders had to not only work out if borrowers could afford a
mortgage at the rate they were being offered, but also work out how they would
be affected if interest rates soared by 3%.
Borrowers who could not prove they could cope with such an
eventuality might have been turned down for a loan on that basis, even if they
could easily afford a mortgage at the existing rate.
For that reason the test was seen by some as a barrier for some
borrowers.
For example, some potential first-time buyers who have been
comfortably affording rents far higher than potential mortgage payments have
failed affordability assessments.
There are some key protections in place to help ensure that
borrowers don't take on loans they may not be able to afford.
The main one is a loan-to-income "flow limit"
which limits the number of mortgages that lenders can grant to borrowers at
ratios at or greater than 4.5 the borrowers' salary.
In short, it is very rare that a lender will consider a
higher loan-to-income ratio because of the restriction.
The FCA's Mortgage Conduct of Business responsible lending
rules also require a wide assessment of affordability.
Find out more about property investing.
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#property ladder
#firsttimepropertybuyer
#interestrates
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#mortgages
#interestratehike
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