Interest rate rise?

michaels

Investment property is an interesting one as retail looks to be quite risky at the moment. Annuities seem poor value but obviously public sector DB pension and state pension are generally no brainier investments unless you have health issues.

However the issue remains that these are savings not funds earmarked for a fixed investment in a relatively short time span. Say you had purchased your ppr with a fixed rat eloan that you had to pay off in 5 years and you had the capital already to pay off the loan - would you put it in risky investments that might be worth less in 5 years leaving you with a shortfall (even if the average return were higher) or would you stick it in an interest bearing account knowing that you had certainty that you would be able to pay of your property and that any interest received was profit. It is a bit like asking whether you would get an endowment mortgage for a 5 year term - most wouldn't.

chucknorris

Ozymandias73 wrote: »

It's not such a reluctant decision for someone who thinks equities may already have peaked or be not far off a peak.

I'm only 60, so my horizon (as far as equities go) is still about 15 years away, and although equities look high, I don't think that they are at peak with such a long time frame. But if you are looking to buy soon, you don't have the luxury of a 15 year horizon, that is what I mean by my references to buying. Equities are (like property) a long term investment.

westernpromise

@ chuck

One of my better (and quite inadvertent) investments has been to hold US equities. Although for many this would be a no-no because of the currency risk, it has been nothing but benign - over the last 10 years the relative weakness of the UK economy has made interest rates low versus the US and the exchange has also been very favourable.

I acquired this position via bonuses part paid as US$ equity, and I am now very reluctant to sell given how well US equities have done in both US and £ terms. I see it as a hedge, not a risk; if the UK economy underperforms relative to the US, I make out.

If the UK started to do well versus the US I would lose out. The US is the world's largest capitalist (= proper) economy, however, while Britain's is socialist regardless of what party's in charge - it's only a matter of degree. So how likely is it that the UK economy will outperform the US economy?

Just a thought.

chucknorris

michaels wrote: »

Investment property is an interesting one as retail looks to be quite risky at the moment. Annuities seem poor value but obviously public sector DB pension and state pension are generally no brainier investments unless you have health issues.

However the issue remains that these are savings not funds earmarked for a fixed investment in a relatively short time span. Say you had purchased your ppr with a fixed rat eloan that you had to pay off in 5 years and you had the capital already to pay off the loan - would you put it in risky investments that might be worth less in 5 years leaving you with a shortfall (even if the average return were higher) or would you stick it in an interest bearing account knowing that you had certainty that you would be able to pay of your property and that any interest received was profit. It is a bit like asking whether you would get an endowment mortgage for a 5 year term - most wouldn't.

Property is by far my most profitable investment, but (and it is a big but):

1. I have been a landlord for over 27 years, and I've had enough of it. I have already started to sell, peace of mind and freedom from hassle is worth a lot to me now.

2. I need to move towards more liquid investments, and release the equity.

3. I need to avoid the next crash, to avoid potentially being a landlord in my 70's.

System

michaels wrote: »

Investment property is an interesting one as retail looks to be quite risky at the moment. Annuities seem poor value but obviously public sector DB pension and state pension are generally no brainier investments unless you have health issues.

However the issue remains that these are savings not funds earmarked for a fixed investment in a relatively short time span. Say you had purchased your ppr with a fixed rat eloan that you had to pay off in 5 years and you had the capital already to pay off the loan - would you put it in risky investments that might be worth less in 5 years leaving you with a shortfall (even if the average return were higher) or would you stick it in an interest bearing account knowing that you had certainty that you would be able to pay of your property and that any interest received was profit. It is a bit like asking whether you would get an endowment mortgage for a 5 year term - most wouldn't.

I currently take all my investment decisions on the basis that asset prices have had one of their longest bull runs ever, supported by massive liquidity. But the interest rate cycle is now on the turn and liquidity is being drained away. I really don't want to pay top dollar for assets only to see the same assts on sale at a significant discount in a couple of years time.

chucknorris

westernpromise wrote: »

@ chuck

One of my better (and quite inadvertent) investments has been to hold US equities. Although for many this would be a no-no because of the currency risk, it has been nothing but benign - over the last 10 years the relative weakness of the UK economy has made interest rates low versus the US and the exchange has also been very favourable.

I acquired this position via bonuses part paid as US$ equity, and I am now very reluctant to sell given how well US equities have done in both US and £ terms. I see it as a hedge, not a risk; if the UK economy underperforms relative to the US, I make out.

If the UK started to do well versus the US I would lose out. The US is the world's largest capitalist (= proper) economy, however, while Britain's is socialist regardless of what party's in charge - it's only a matter of degree. So how likely is it that the UK economy will outperform the US economy?

Just a thought.

My plan is to eventually have a more diversified range of equities with a global tracker, the one I have in mind (VHYL etf) has a 36% weighting in USA equities.

chucknorris

Ozymandias73 wrote: »

I really don't want to pay top dollar for assets only to see the same assts on sale at a significant discount in a couple of years time.

That is why I am going to hold individual corporate bonds to maturity, so the price can't fall. Yes, it could fall to zero if the the company folds, but I won't be taking on the riskier bonds. But in your circumstances, you are better off staying in cash.

lisyloo

Ozymandias73 wrote: »

I currently take all my investment decisions on the basis that asset prices have had one of their longest bull runs ever, supported by massive liquidity. But the interest rate cycle is now on the turn and liquidity is being drained away. I really don't want to pay top dollar for assets only to see the same assts on sale at a significant discount in a couple of years time.

Seems perfectly reasonable, but I don't think you can then complain about poor savings rates that have a shortfall risk/gurantee.
There is a price for safety.
Nothing wrong with wanting better rates, but there is no guarantee that the next rate rise will be passed on in full.

System

lisyloo wrote: »

Seems perfectly reasonable, but I don't think you can then complain about poor savings rates that have a shortfall risk/gurantee.
There is a price for safety.
Nothing wrong with wanting better rates, but there is no guarantee that the next rate rise will be passed on in full.

Savings rates have already been going up quite significantly recently, and before the base rate has even started to rise. A base rate rise would probably accelerate that trend. The trend is my friend.

Filo25

Would probably expect a .25% rise in August at this stage, although even that isn't completely nailed on yet, that should be it for this year though.