Interest rates heading down, trade and gold

A couple of BIG NEWS items in a thrilling week, when even watching smoke from a chimney has been strangely gripping.

First, interest rates have fallen. Yesterday, 5 members of the 9-strong committee at the Bank of England (which decides rates) agreed to cut rates to a 2-year low of 4.25%. The majority view was to cut by 0.25%, although 2 people wanted to cut by more. As the news was announced, there were hints that there are more cuts to follow.

It’s obviously good news from the perspective of mortgage holders and there are early signs of a gentle little price war from providers, so I expect further slight reductions in coming days and weeks. Those on a tracker will of course see their monthly payments fall. And those looking for a new fixed deal might now be able to wrangle a lower rate. Even if it’s not quite time to re-mortgage yet, if it’s on the horizon, there’s nothing to lose by getting a quote from a broker as most offers last for up to 6 months.

Right now, the average cost of a 2-year fix in the UK is about 5%, but there are deals currently around the 4% mark, so do shop around. If you have a 40% deposit, the best deal I can see today is from Nationwide at 3.84%.

Why are rates falling?

Although we expect a little spike in inflation over the summer as larger household bills take their toll, generally speaking we’re not in that horrific cost of living nightmare we faced a few years ago. Prices aren’t rising so fast, the economy has cooled, so there’s less pressure in the system to manage. Good.

However, when this side of the inflation seesaw goes down, it does so because of some bad news too. Growth prospects here look a bit ho hum, not helped by Trump’s protectionist policies. Unemployment is forecast to head up towards 5%, so people are less worried about high pay demands, which look like something of the past. And despite Rachel Reeves’ focus on growth, the simple fact is it’s not really happening. We're dawdling, not sprinting. So economists start to worry about recession more than inflation and look to cut interest rates as way of giving us all a double shot and getting us spending, and building, and hiring.

If we consider all of this, it feels inevitable we will see a drip-feed of two or three rate cuts between now and the end of the year. So, if you have cash savings, and are sitting on a lump sum, and are procrastinating, I have four words for you: Get On With It! Find a good deal today and plonk your money in – the top rates for 1-year terms are around 4.5% today.

Whether you're wondering about mortgages, saving rates or annuities, you can get more on the latest news and expert tips.

A VERY NICE DEAL

The other Big News (for Keir Starmer anyway) is the trade deal with the US.

Whether you think Mr Starmer is a big crawler with his handwritten love and kisses letters from the King or a smart negotiator, yesterday Donald Trump confirmed a major trade deal with a BIG, AND HIGHLY RESPECTED, COUNTRY. (Wake up at the back, this is us!)

Superficially, this is good news which was quickly welcomed by the Governor of the Bank of England in his remarks yesterday. I say superficially because there is still a flat 10% levy on most goods, so I suspect the Governor of the Bank of England meant that, having had a threat to have a finger cut off with a meat cleaver, it was pleasant to only have one broken with a mallet.

With the trade war still gathering pace, we can also expect to see an influx of cheaper Chinese products here, as firms like Shein start to pick up advertising and activity in Europe, avoiding the NASTY MAN IN AMERICA.

Gold Bugs

Gold continues to hold strong in the sandstorm of global uncertainty. In response to reader interest and queries, we’ve a new article with opinion from managers who run gold and commodity funds. The summary view? It’s gone gangbusters already BUT with Trump-The-Unpredictable at the helm, it could well have further to go.

If you want to invest in gold (and it’s not a recommendation, I’m just providing information!), I think the easiest way is using an Exchange-Traded Fund (which confusingly will be called an ETC because this is an Exchange-Traded Commodity). And then make sure you understand the difference between physical gold (the hard stuff you can bite) and gold mining shares. If you’re after the hard shiny stuff, then iShares, Invesco and WisdomTree have well respected Physical Gold ETCs which you can buy on investment platforms, just like a share.

I’ll leave you with a final request. We're growing our research business and doing a lot more consumer research for our industry clients. We have our own research panel of savers and investors and have a few (paid) projects where we need to speak to more people who have a financial adviser. To hear what you think. So, if you have a financial adviser who looks after your investments and pensions, we’d love you to join our Panel. We also have other projects coming up for DIY investors and beginners too, so please consider joining.

Over and out for this week, have a LOVELY WEEKEND in this BIG and HIGHLY RESPECTED country, you BEAUTIFUL people.

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