It has been reported recently that inflation has risen to 3 per cent on average over the past year and with average pay rises at just 2.2 per cent, households are feeling the squeeze on their budgets. According to the experts, inflation is the ‘silent threat’ that eats away at the real value of cash over time. The new 12-sided one-pound coin is now worth less than a third of it’s predecessor with a relative purchasing power of only 31 pence.
Therefore, it’s understandable that savers and retirees will be acutely aware that interest rates on their deposits are failing to keep pace. There is mounting pressure on the Bank of England to raise interest rates which would be the first rate rise in a decade.
A rate rise will likely boost sterling and relieve the pressure on inflation however investors should not expect an automatic improvement in the interest rates they receive.
With the average easy access savings account paying just 0.42 per cent, even with a rate rise, investors are not receiving anywhere near the rates they deserve. Therefore, it’s no surprise then that many people are seeking an alternative place to put their money and property has become the first choice for a better return.
Property has shown no loss in any 5-year period since 1973 and it’s an asset which provides both capital growth and monthly income. House prices have continued to increase on average of around 5 per cent per year and 1.8 million more households will be looking to rent rather than buy by 2025.
Additionally, the Autumn budget from Chancellor Philip Hammond is highly likely to include a mortgage tax relief U-Turn which means now is the perfect time for potential landlords to invest in Buy-To-Let.
With a range of properties available, low entry levels and returns of up to 10 per cent per year, savvy investors who are looking to take advantage of this increase in demand will be able to do so with ease.
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