Personal Finance: `It Is Only a Question of When Interest Rates Will Go Up. Your Mortgage Is Going to Get More Expensive'

By Willcock, John | The Independent (London, England), January 8, 2000 | Go to article overview
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Personal Finance: `It Is Only a Question of When Interest Rates Will Go Up. Your Mortgage Is Going to Get More Expensive'


Willcock, John, The Independent (London, England)


AS WE all slowly emerge, coughing and blinking, from the seemingly endless Christmas-cum-Millennium festive season, the world of personal finance seems a more dangerous place than it did just a few months ago.

The private-investor frenzy for hi-tech stocks is continuing unabated, despite clear signs that interest rates around the world are about to go up, threatening to put the brakes on one of the longest bull markets in financial history.

It is no longer a question of if interest rates will go up, but when. House prices, borrowing on credit cards and even manufacturing are going like the proverbial train, so it's a safe bet that your mortgage will be more expensive by the end of the year. That is, if you didn't remortgage to take advantage of the many fixed-rate deals going around last year. As UK rates head to a possible peak of 6.5 per cent or even 7.0 per cent, remortgaging now to lock in at a lower rate still makes sense.

One thing that worries me is that private investors are chasing ever smaller hi-tech stocks on AIM and even OFEX, as the bargains on the main stockmarket dry up. This is all very well, but when the markets take the hit of rising rates the smallest stocks will prove most difficult to sell.

In the good times it is easy to forget that small company shares are often very difficult to sell when prices turn down, as there is a smaller pool of shareholders willing to buy them. Moreover, the difference between the price you can buy and sell a share at - the "spread" - will widen when the market turns down.

The vital thing to remember is, never invest money in shares that you can't afford to lose.

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