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Base Rate Time Bomb

Tuesday, 5th August, 2014

For five years interest rates have been at an all-time low. That's created a situation where residential property investors are relying on rates remaining that way to realise a good return on their outlay. If investors don't take the right measures now, however, they could be in for a shock when the inevitable and apparently impending rate rise occurs.

It seems inescapable that rates will rise. Mark Carney, the governor of the Bank of England, indicated just last week that he envisions a "new normal" rate of 2.5%, once they begin to increase. That's a far cry from the situation we have now, with interest rates having remained at a record low of 0.5% for the best part of half a decade.

The popular perception is that the Bank of England could lift rates as soon as January. By how much remains to be seen. However, many commentators agree it would be sensible for them to do so only slightly - by 0.25% for example - and gradually. Any change, regardless of its size, will have far-reaching consequences on property and those who invest it it as an asset class.  


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