With interest rates on the way down, where can you make money today? Article Published: 14:32 03/12/2008 Article Classification: Kalamon Fund
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With interest rates on the way down, where can you make money today?

Not too long ago, it would be hard to believe we could have rates as low as 2.0% in the UK, but that is now looking very likely. The last time rates were that low was October 1939!

Rate cuts in the UK began in December 2007, falling from 5.75% to 5.5% and then followed by a 0.25% and 0.5% cut until the 6th of November, when the BoE shocked the market with a 1.5% cut bringing rates to the current level of 3.0%.

As the British economy teeters on the brink of recession and the BoE’s key fight is growth - not inflation, the bets on a 1.0% cut by the MPC tomorrow are growing.

A rate of 2.0% now looks more like a when, than an if. However not all commentators see this as a good thing.

Emma Hughes of the FT says “The last two dramatic base rate reductions failed to prompt mortgage lenders to flood the market with better priced deals so why should another base rate reduction force their hand?” She added “At the start of this crisis, the government seemed to allow things like Northern Rock to drag on, I was happy to demand swift and dramatic action. But when should we start to wait to see if steps already taken will achieve the desired goals?”

Whilst generally people see interest rate cuts as a positive thing, there are significantly more savers in the UK than those with mortgages. No doubt those relying on pensions and savings income will not be as positive as those with large mortgage debts if the reduction is announced.

With the stock market slump and savings rates at the lowest level for years Olive Tree say that their overseas property fund is the ideal place for investors seeking a good medium term return as it relies on neither of these areas. Olive Tree’s Kalamon Fund is targeting a 75% return over five years by buying discounted property in growth markets around the world. Contact Olive Tree for more information, or follow this link.