This Week in Property: The Latest News (1st October 2021)

Take a look at what our CEO Gill Fielding has to say about this week’s property news…

Scarcity is all in the mind

I don’t have much petrol at the moment and I don’t need a great deal but I went to try and fill up yesterday to find that none of my local petrol stations had any petrol. Now I understand that there’s plenty of petrol for all – IF we just all buy what we normally buy but people are panic buying and filling up and filling spare cans etc so there’s not enough to go around.

People panic because they fear scarcity and their drive is to hoard and of course that’s the worst thing to do when supply is restricted. It’s the same for air, or water or food or money – as soon as we fear that we might not have enough we start to behave irrationally and that’s due to a part of our brain going into fear mode – and that’s a natural response but we can override it with conscious thought and effort – and that’s the sensible thing to do.

We don’t actually need much to feel Ok – and it’s the same for any resource – all we need is enough: enough to be satisfied and that’s true for all resources and even money. Most of us don’t need huge amounts of money– just enough to feed ourselves and have a decent life. I read once that there’s enough money in the world for every human to be a millionaire – but it isn’t distributed that way. And there’s enough food and water and petrol – if we just all take what we need to have enough and no more. so I have ‘overridden’ my desire to panic about the petrol.

I have enough for a couple of days and by then the situation might have improved – and if it hasn’t then I’ll just change where I go for a bit. It isn’t life threatening and it’s an opportunity to do something different to my normal routine – and that’s OK!

Time gives the best returns

We always read that young people don’t like investing for their pensions because it seems so far away but I wish all young people were educated about how easy it is to generate a massive return if you have the benefit of time.

If you invest a little money in shares over a very long period of time it turns into a huge amount – eventually. Even if we look at the last decade we know that consumer prices (inflation) have risen by 19.5% whilst if you had your money in standard bank savings then your money would have risen by only 7.6% – meaning that you were effectively worse off by about 12% because the inflation easily exceeded the growth in your money. However if you had invested that money in a standard tracker shares fund then your money would be worth 102.4% more and of course the longer you leave it the bigger the difference becomes. What increases your money is the mix of the amount you save, the rate of return you get and the length of time you leave the pot to grow and if you don’t have much money then the length of time will compensate for that.

It’s a simple lesson of how to create a large pension fund. We could teach it in schools and support people with it and solve the pensions crisis for all our young people starting today. We all know that time flies and wouldn’t it be lovely to get some financial benefit from that!

Interest Rate increases?

We are at historically low interest rates in the UK but that can’t last for ever particularly as inflation at about 3% is now running above the Bank of England target of 2%. This will cause concern amongst the Monetary Policy Committee who set our interest rates and we know that 2 of the 9 members voted last month to change monetary policy. Of course as soon as 5 vote in a certain direction then change happens. All we have to do now is to predict when it’s most likely to happen and my best guess is an interest rate rise is most likely to happen next February. They won’t change it too soon just in case inflation settles and they tend not to make a major change on first draft data (which is what they get in January). February is the first month where they have solid year end data on which to base any decision so that’s the most likely month for change. So what do we do? My suggestion is that if you are thinking of taking out a mortgage or a re-mortgage then consider getting a fix rate mortgage now or before the year end to get the best deal. The mortgage companies are likely to start building in a potential interest rate rise to their products soon so get in quick!

Credit card imbalance

The Credit card industry is a weird part of the financial services sector as they punish people for being poor and reward people who already have money and strong credit scores with 0% credit card options. However that may be changing as we now have figures that say that the average credit card interest rate is now a whopping 26% and that has risen by almost 1% per year for the last two years. This is partly because the credit card companies know that more people are using their credit cards and are taking advantage of the potential earnings. There were 309 million transactions in June which is nearly 10% higher than June 2019. BUT if you do manage your credit file and improve your credit score there are some fabulous deals and there are now 59 interest free credit cards and 61 balance transfer deals – both up from prior months. As usual the lesson is get educated about how credit cards work and how to manage your credit file and money becomes easier to get and cheaper! Education pays!

If you would like to find out more about investing in property, come along to our 3-Day Property Investing Training.

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