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Bank of England releases £150bn. What does this mean?

Another possible signal of reduction in interest rates.

The Bank of England has released the banks from a requirement to hold £5.7bn of capital as a protection against downturns.

I want to put this into plain language and make it easy for people to digest.

Basically, this will see that banks have more available funds… which means they could increase their lending if they wished. In turn, this will see more competition in the market, which could lead to lower interest rates.

“It is the first time the Bank has enacted this policy, which will increase banks’ capacity for lending to households and businesses by up to £150bn.”

Mark Carney said “The UK has entered a period of uncertainty and significant economic adjustment.” He stated it was the Bank’s role “to be straight with the British people” about risks to financial stability.

Of the sectors being monitored, the two I am most interested in are the growth of the Buy To Let Mortgage lending, and the decrease in the value of the commercial property sector.

Within these sectors, investors have been stopped from withdrawing their money.

This means that they could lose their value, but the hope is that they won’t/shouldn’t go bust. Essentially, this is a safe guard exercise to ensure they don’t become worthless.

This is probably the WORST outcome for investors and the BEST outcome for the commercial developers and the UK economy.

grand home mansion lending bank of england carney

Now is not the time to stretch to the far end of your budget, even if you’re after a home as grand as this.

This will not necessarily have a knock on effect for residential mortgages/property sector.

Another take away point is not to get a mortgage which costs the top end of your monthly budget. I think this should always be the case and it has been reaffirmed by Carney yesterday. This is something I know my self-employed customers will find difficult. I know that we all want the best house available, in some instances the “dream house”, and that can mean scraping together every available income to make it happen.

I would certainly advise that if you are interested in buying a property, then do it!!!

…just don’t over stretch your money.

Carney said “households should act prudently in the wake of the referendum.

“We always advise people to be prudent, whether times are good or times are difficult,

“Certainly if you’re taking out a mortgage, at some point over the life of that mortgage times will be difficult, it might be at the start, it might be five years in, it might be 10, 15, whatever. So you want to make sure as a family, as an individual, that you’ll be able to service that mortgage if times are tough; you don’t want to lose your flat, your home.”

2008 was my toughest year in business as the mortgage market crashed 2 years into my self-employment. I had to diversify into life insurance and specialised solely in that field for 6 years, I am so glad to be back in the mortgage world with a niche.

This was a great deal of reassurance to me:

Making attempts to ensure that there was a not a rerun of conditions after the 2008 banking crisis when banks were reluctant to issue loans, Carney said: “That’s the one thing we want to take off the table.”

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