The 5,836 Runcorn Savers batten down the hatches with low interest rates set to continue into the 2020’s

Thu 22 Sep 2016

Helen Pass, Director

You might ask, what has the plight of the Runcorn savers to do with the Runcorn Property Market … everything in fact. Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

... And this isn’t some made up story to capture the headlines of newspaper editors. The yield (posh word for interest rate or return) on 10-year Government bonds is currently 0.61 per cent. This indicates that the money markets believe that the Bank of England’s base rate will, on average over the next ten years, be below the 0.61% rate they are buying the 10 year bonds at (because they would loose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. You see as a saver, I did a search of the internet and the best savings rate I could find was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £210,000 nest egg would earn you £5,250 a year – not much. However, on the other side of the fence, growth in Runcorn house prices and princely buy to let yields have made property investment in Runcorn an appealing option for many. According to my research, the average Property Values in over the same period have risen by 15.9% and yields have been excellent.

 

 

So personally, I would have bought three 3 bed properties on the New Town Estates for £70,000 each. These currently will rent for £550 to £575 per month. Using these averages, the Runcorn landlord’s property would be worth £243,390 and they would have received a total of £101,250 in rent – making the total return £344,940. Meanwhile, whilst our 5,836 Runcorn Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £227,200.

There are risks as well as benefits to buy to let though. As my blog readers know, I tell it like it is and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA. Although you can only add £15,240 a year into an ISA, but you would also have the ability to sell up quickly if you want ... but one last thought…

The other side of the coin is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The investment fund isn’t something that you can touch and feel, isn’t something tangible, isn’t something physical, isn’t something concrete, it isn’t bricks and mortar ... and that is why my fellow Runcorn homeowners and Runcorn landlords is why the love affair of the British and Property will continue.

If you’re interested in investing or have already invested in the Runcorn property market and want to discuss maximising your investments, pop in for a coffee at 60A High Street, Runcorn, WA7 1AW or visit our website www.homesmartlettings.com