In this video I explain why the UK government has cut interest rates to 0.1%, what they think is going to happen as a result of this cut. What I think of this decision and the impact that I think it will have on the UK property market and the wider stock market.
The UK Government cut the Bank of England (BoE) base rate from 0.75% to 0.1%.
Why have the government cut rates?
The Government have cut the UK interest rate to spur investment and borrowing to continue to grow the economy, to calm fears of recession and to support business' in the country.
What do I think of the decision?
I personally believe the UK interest rate has been cut too early. I also don't think that many business' will be looking to invest, as a result of the illness I think business' are preparing to conserve cash in the case of an extended period of time making £0 sales. I also personally believe that the illness will not cause a recession (at least 6 months of negative growth) as China believe that after only 2 months that they have cured the entire population.
How will the rate cut effect the stock market?
I think that the UK interest rate cut will not significantly effect the stock market at the moment as it is too volatile. There have been a significant number of days with over 5% movement in the market. But in the long term I believe a positive impact will be shown due to the proactive reaction from the government to help out the wider population, not just the large banks. I also believe its a great time to invest in strong companies with a good track record of consistent operations.
How will the rate cut effect the property market?
Real Estate prices usually increase after an interest rate cut as it makes mortgages more available. This will create an increased number of buyers (in the supply & demand equation). However, there may also be a risk of additional sellers in the market due to people losing jobs and secure income sources. The drop in rates will also likely be passed to you if you have a tracker/variable interest mortgage product.
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