It has just been announced today by the Bank of England that interest rates are to be cut to an all time low of 0.25%. This represents the first cut since March 2009 and will be viewed in different ways depending on your personal circumstances.
If you are one of the 1.5 million borrowers with a tracker rate mortgage then your monthly repayments will probably go down but if you are on a fixed rate then most likely you will see no change and your interest repayments will remain the same. If you are looking to buy a new house or remortgage, the rate change could spell good news as banks may offer lower mortgage rates.
Savers are likely to see a further cut to the already terrible savings rates offered by many of the banks. This may see more investors turn to Alternative Finance which has, over the last 7 years, been challenging the banks with investment products offering better returns.
Peer to Peer evolved out of the low interest rate environment. Interest rates offered by the banks to customers has been pretty abysmal over the last few years and these are set to get worse today. We may possibly even move to negative territory as banks start charging customers to use a current account.
As a P2P lender we feel this environment will further enhance the need and demand for Alternative Finance. Unlike the banks, Peer to Peer lending isn’t covered by the Financial Services Compensation Scheme so there is a higher degree of risk, but with higher rates of return on offer, it may be worth investors exploring as part of a diversified portfolio.
Since April 2016, Crowdstacker also has its own dedicated ISA, called the Innovative Finance ISA which is quite exciting for many investors who can also shelter their returns from tax.
by Karteek Patel, CEO Crowdstacker.
Tax treatment is dependent on individual circumstances and may be subject to change in the future.