Welcome to the October Edition of Property Investor Monthly.

I'm not sure if its only me that seems to want this, but we need another half percent interest cut immediately!

The Government still doesnt seem to understand why its all doom and gloom and that the economy hasnt picked up. Its fairly straightforward, so incase Gordon Brown does actually read my emails, I'll explain it easily for him.

Firstly, People are coming to the end of their mortgage deals, and therefore maybe had a 5% fix for 2 or 3 years. That has now gone to 6.5% variable, which for some can mean a difference of a couple of hundred pounds per month.

Secondly, the banks that have taken all this Government money have in fact, not passed any of it on to any mortgage folks. For example, out of all of my properties I own, I have received only 7 letters stating a .5% interest rate cut had been passed on (to date). This means that the banks are actually starting to make money again, for example, one deal that was 4.99% before the interest rate cut (for existing customers only of course) went up to 5.39% after the interest rate cut - thats a .09% interest rate increase in profit for the banks. If you have ever wondered who is making the money right now (there has to be someone right?), then theres your answer, its the banks using tax payers money, to lend it back to us at much higher rates. Incidentally, you may have noticed the removal of 85% loan to value products, and thats because the banks do not want more new business, they want to earn top buck for the existing customer base who they have a relationship with.

Thirdly, with less money in their account, people are simply not buying anything, in fact cancelling things like gym memberships, life insurance and putting off anything big like new cars, etc.

This turns out to be a vicious circle because as people do not spend, manufacturers stop manufacturing, and therefore lay off jobs, which then means an increase in benefits paid for by the Government.. There is less tax coming in to cover this, and so Government borrowing has increased hugely in the first 6 months of the year.I bet you can guess who will end up picking up the tab for this?

At this rate, more and more people will be losing job, losing their homes, increasing benefits, and the like, and the Government doesnt seem to quite get it. Interest Rates MUST come down.

The Bank of England are only concerned however with inflation as that is they're prime remit, and at 5%, they're really concerned right now. However, inflation will soon come down next year, as manufacturers drop their prices to get cash in at any cost, just to keep the cogs turning.

Have you noticed just how many sales are going on right now ? Those price decreases will account for some deflation, but we wont get those figures for quite a while.

This is obviously a very simplified view of the entire economic cycle, but it doesnt take a rocket scientist to work out what we need, another interest rate cut, not in November, but right now.

Not a week goes past when we receive yet another repossession notice for one of the properties we manage on behalf of landlords who simply can not cope with the increase in mortgage costs.

Rents have gone up in some areas, but in others they haven't, and this means that landlords get hit from both sides, with higher mortgage costs, and non increasing rents. Services charges on Apartments also do not help, as they pass on the increase in electricity and their own increasing costs onto you the landlord trhough the service charge.

The solution is not a simple one, but we must have another interest rate cut to stem the level of landlord repossessions.

The end of boom and bust ?

Wrong ! if anything, as builders stop building homes and mortgages are increasingly harder to get, the boom and bust cycle will accelerate, and as and when the banks start lending again, there will be a rush to buy property again, and when this happens, bearing in mind less property has been built, the property prices are going to shoot up. This may take up to 10 to 12 years, but it will happen. I guess we'll have to wait (and hope) and see...