TAKING BACK CONTROL

All eyes will be on the Bank of England’s policy committee this Thursday, who have their monthly meeting to decide whether to increase the central bank’s interest rate for a record-breaking 13th?consecutive time.

The smart money is on another 0.25% increase on the current 4.5% base rate, which would take the rate to a 15 year high.

In the last few days, both the Chancellor Jeremy Hunt and Michael Gove, the cabinet minister for housing, have went on the record, to say that the government will not be able to do anything for borrowers?who could see their mortgage rates go to 6%.

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Gove told the BBC’s Sunday with Laura Kuenssbery, yesterday morning - (wait for it) “Money to address the steep rise in interest rates could not be MAGICKED FROM THINK AIR, and added, we have to be careful” (LOL)

The reality of course is absolutely different, in that if there was the political will within government to “FIND THE MONEY”?required to help those now not in a position to pay 6% on their mortgages, then they absolutely could “MAGIC THE MONEY OUT OF THIN AIR”just as they have been able to find money to do all sorts of things throughout history.

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A treasury source stated over the weekend that “borrowing money to subsidise mortgages, risks fuelling inflation further, which could force the BOE to increase rates further”.

What I have learned in my 20 odd years of business and having an interest in politics, is that it is fairly straight forward for quite a few people, particularly central bankers and politicians, to come up with any kind of argument, which would validate their own agenda and position.

MORTGAGE SUPPORT FUND

For me, I am always looking for solutions, that is how I am wired, and a cursory look through the papers today, and in particular when I came across UK economist Richard Murphy’s suggestion, who is a Professor of Accountancy at Sheffield University Management School, I would agree that if the government really wanted to, they could help borrowers who are now in a huge amount of financial distress.??

Richard Murphy has two radical ideas (1)?cut interest rates?and or (2) Banks are making at least ￡40BN a year in unearned profits, as a result of extra interest now being paid to them by THE GOVERNMENT.?Tax that unearned income?of the banks at 75%, which will generate c. ￡30Billion, which could go into a mortgage support fund. Simple ey?

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Personally, I like both of these ideas, but in the short to medium term, I have no confidence in either the Bank of England or Government at any level, going down this pathway, which is incredibly unfortunate, as the outworking’s of all of this is going to be very painful for many homeowners and business owners.?

TAKING BACK CONTROL

If you are reading this, impacted by what is happening in the financial world right now and not sure what to do, my message is quite simple – it is time to TAKE BACK CONTROL.

I learned a long time ago that nobody is going to save you, nobody is going to come along and help you understand any of this, you must be proactive and you must make a decision to put a plan in place, to get through the next three years.

We know that the BOE have priced in further rate rises, and over the weekend, I was reading that the Resolution Foundation Think-tank have stated that they think the BOE might raise rates to 6% over the next 12 months.

The questions you have to answer are;

How is this going to impact you?

How is this going to impact your business?

Do you have to re-mortgage in the next two years?

Your business loan – is the coupon pegged to the base rate??

Will you have to refinance that loan in the next two years?

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HEAD IN THE SAND

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At GDP, we have been working in these markets for over 13 years now, and have helped hundreds of people, families and businesses mitigate and deal with financial distress.??

We understand how this impacts people, both on the financial side of things and also the human side.

Unfortunately, and I have seen this recently with a number of people who have reached out to us, they continue with their “head in the sand approach”

I say to you this plan and approach,??is catastrophic in such a volatile environment.

The name of the game now is to take back control, ask for help, reach out to people who might be able to help you, go and speak to someone you trust and might refer you to someone with a track record of success in this area.

Whatever it is you do, I encourage you to do something.?

That's all for this week, but as ever, if I can help you or your business with anything in the debt or funding markets, please get in touch.?

Have a great week!

CD

Conor Devine MRICS,?has been working across the property, debt and funding markets for over twenty years, and is passionate about helping others in the industry overcome challenges and to reach their business goals.?

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