The 4,342 Camberwell Savers batten down the hatches with low-interest rates set to continue into the 2020’s.
You may question what is the connection between Camberwell savers in relation to the property market? You could argue that it is everything. Just take a look at the newspapers, financial experts state The Bank of England’s decision (back in August) to reduce the base rate to a record low of 0.25 percent is a continuation of a pattern where rates are likely to remain low up until early 2020’s.
This information isn’t made up for attention-grabbing newspaper headlines. The current yield (also known as return) on a 10-year government bond is currently 0.61 percent. This means that money markets believe the Bank of England’s base rate will, on average, be below 0.61 percent for the 10-year bond they are currently purchasing otherwise if the average were to increase above 0.61% they would lose money. It would, therefore, appear that interest rates for the UK are likely to be low for an extensive period.
What does this mean if you were just to focus on saving money? People who have managed to save money during their working life and are seeking ways to maximise the interest on their savings could find a bank with a good saving rate. The best I came across was a 5-year fix rate of 2.5 percent a year with Weatherbys Bank. From an investment pot of £200k, you would get a yearly return of £5k, which isn’t a huge amount. However, growth in the value of Camberwell property market combined with buy to let revenue has made Camberwell an eye-opener for investors.
The average yield for a buy to let property in Camberwell over the past five years has been 6.7% on a yearly basis, also the average value of the property has increased by 51.6% over the same period according to research. If we take these figures / averages and use the £200k investment to pot the following…
If you had become a buy to let landlord in Camberwell, the £200k invested in a property would now be worth just over £303,200 as well as receiving a total of £67,000 in rent. This would now make your investment pot would be £370,200. Over the same period, the 4342 savers based in SE5 would only have grown their nest egg to £211,184.
As well as the significant benefits, there are also risks involved within the buy to let market. You can have large amounts of money tied up in a buy to let property, and the value of this investment can also fall leading to a potential loss. Compare the above to stock market income-based investment funds where you may achieve a return of 5% or even better but you can liquidate and gain access to your cash very quickly.
However, you are unable to purchase unloved stock market income-based investment funds and set about renovating it plus multiplying value yourself. Investment funds are not to be touched. They are not physical bricks and mortar where you can add value. This is the reason why those Camberwell homeowners and landlords who see this value will continue to invest in property.