By Ed Emerson
Since March 2009 – when the recession ended and the financial markets started to rise again – UK self-employed mortgage seekers have enjoyed the lowest and best interest rate environment in British history.
At that time seven years ago, interest rates were moved down by the Bank of England to their current position – a base rate of 0.5%.
And this has been a game-changing moment for UK self-employed mortgage borrowers and savers alike, but for very different reasons.
For savers it meant the end of relatively good returns on their savings – one of the few truly risk-free options for your money to generate a decent return, as long as that return is higher than inflation.
Back then the banks would offer rates of up to 4%, 5% and even 6% in some cases.
What that meant in real money terms is that it would take a saver either 18, 14 or 12 years, respectively, to double his or her money.
So, how did I figure that out?
Well, that calculation is called the Rule of 72, and all it means is that when you divide the interest rate – like 4%, 5% or 6% as in the example above – by the number “72”, you get the following:
- (72 ÷ 4) = 18 years,
- (72 ÷ 5) = 14.4 years, and
- (72 ÷ 6 ) = 12 years.
So each of these calculations allow you to figure out the number of years it will take you to double your investment at any particular interest rate.
The problem now is that since the base rate is so low, you are typically only offered about 1% or less on your savings.
That means it’ll take you 72 years (or longer) to double your money by leaving it in a savings account.
Now, even in the best of times for savers – periods of higher interest rates – a savings account is a poor excuse for an investment strategy. You can find out more about those here in our Investment Secrets section.
And the exact opposite is true for borrowers.
We are in the midst of one of the greatest borrowing opportunities for UK self-employed mortgage seekers that we’ve ever seen, and it marks an absolutely ideal moment to capitalise on long-term, fixed rate mortgage opportunities that will protect you against when we inevitably see higher rates.
This has been a UK self-employed mortgage market game-changer, and those who don’t capitalise on this will only be able to look back at some point in the future and marvel at the chance they missed out on.
Want to know more?
Why not see what HNW Magazine’s Self-Employed Mortgages section here has to offer you in terms of advice, guidance and options.
And look out for HNW Magazine’s report The 5 Steps to a UK Self-Employed Mortgage out soon, and take advantage of the mistakes others have made so that you don’t have to.
Ed Emerson, Editor, HNW Magazine