The consumer price index rose by 0.6% between June and July (and is now completed the double of the Bank of England official target of 2%) and retail (excluding mortgage interest bills) price index increased 0.5% to 5.3% (which is over twice its old target of 2.5%). The main factors of inflation are coming from abroad in the form of rising fuel and food with food prices and non-alcoholic beverages is increasing at a record pace. A survey conducted by The Economist from 55 countries showed 12 two-digit inflation rates.
Is good news for inflation for owners?
Most economists argue inflation is bad for the economy. The lack of price stability makes it very difficult economic decisions for businesses and consumers. Owners suffering from rising costs and prices, as any consumer. During the owners of that in recent years suffered massive labour prices as skill shortages have increased fees for tradesmen, such as plumbers, builders and decorators. In addition, there have been other increases in prices, such as accounting and buy to let insurance, premiums continue to climb. But the main advantage of inflation for owners is that many have used a buy-to-let mortgage to secure their investment property and inflation may reduce the value of their loans to buy to let.
Inflation and buy to let ready
If an owner takes an interest only buy to let mortgage of £ 100,000 on a period of 20 years in a zero (e.g. Japan) inflation economy, then 20 years this loan to buy to let would still have a value of £ 100,000. But if inflation is running at the current Bank of England 2 years 20% target rate, the actual real value of mortgage to buy to let will be reduced to £ 67,297. If, however, inflation is running at the Bank of England, double target rate to an average of 4%, then the actual value of the buy-to-let mortgage less than half its original real value at £ 45,639.
Ideal for owning a time: so, with prices of real estate falls and labour and the insurance costs rising, many believe that it is a bad time to be an owner. Professional owners know that it is the ideal time to buy because:
1 They can pick up the properties to buy for bargain prices.
2 Rent increase rapidly.
3 Borrowing costs are abandoned. The Bank of England has reduced the interest rates three times this year and is doing its best to keep them as low as possible.
4 Inflation shrinks the real value of buy to let ready.
Therefore owners are found on the market current borrowing is cheap and their debt balance is devalued because of inflation running over targets for the Bank of England.
On Benham & Reeves residential rentals:
With nine offices in the best parts of London - only London locations, handling, if you need advice contact us London rental specialists independent leader.
No comments:
Post a Comment