Every financial quotation that uses history as part of its marketing always qualifies its use by stating it is no guarantee of what will happen in the future. It is often used as an illustration of what growth an investor could expect if history was to repeat itself over a given period. Property is generally recognised as a good investment beyond the very short term. There are occasions when values fall; it happened during the recession but it is generally a temporary setback. One aspect of investment that is extremely interesting is the prevailing interest rate and certainly the current position is very interesting.
Thirty years ago the average house price in the UK was around £30,000 with interest rates around 12%. Today the average is just under £180,000, a few thousand lower than the peak of 2007 before the financial crash. Values are rising again however and it is also encouraging that interest rates are so low. They dropped to single figures two decades ago but historically they have never been so low. There are now fixed rate mortgages for those with good sized deposits as low as 2 – 3% for a number of years.
In this financial environment and with decent job security within the UK there has rarely been a better time to look at personal finance, everything from buying a house, remortgaging, consolidating debt or taking out a loan. It is an opportunity that is not available to everyone; those who got into real financial trouble during the recession and those setting out on a career and yet to build up assets.
Even for those people however it is an opportunity. Those with current debts would be well advised to look at their financial problems to see whether they can reduce their monthly outgoings. There are indications that interest rates are unlikely to rise until the second half of the year and then only very slowly. There is a fairly new breed of financial institution; those that operate primarily online and place more store on an applicant’s ability to repay a loan over the specified period rather than deciding purely on the applicant’s credit history.
The Internet is full of information. It cannot create financial experts overnight but there is enough online to get people thinking and asking questions. It would be time well spent. No one should lock themselves in to expensive deals unnecessarily.
Credit cards are convenient yet interest rates on outstanding balances are crippling. There is plenty of cheap money round to pay such balances off and the temptation to build one up again should be resisted at all costs. Every financial decision must be thought through to see whether there are any major disadvantages in a course of action. Interest rates and the term of any borrowing are the two parts of any financial ‘contract’ that get the headlines but it is the practical detail that needs close examination. What is the total to be repaid and the monthly commitment to do so?
There is always help available from people who are involved in finance every day. It does not mean that such advisers are right on every occasion. After all the whole industry was found out when the recession hit. What is certain is that someone that carefully considers their personal finances and asks the right questions is more likely to be on the right track as not.
Everyone has the opportunity to improve their financial position with a little care. It can be by reducing mortgage repayments, consolidating expensive ‘money’ into more affordable loans or simply showing a level of responsibility that will make themselves into ‘good risks’ in the future. While rates are at an historic low why not act?