5 Things To Do BEFORE Interest Rates Go Down

When will interest rates go down?

This is one of the most searched questions at the moment as different central banks at the moment consider when to pull the trigger to lower interest rates.

If you're currently in the wealth accumulation phase of your life, I believe that this uncertain period before interest rates start to fall presents an opportunity.

Most people will sit waiting and will pin their decisions on the rates falling, however, I believe there are certain things you should consider taking advantage of now before the interest rates fall.

When Will Interest Rates Go Down?

Truth is, no one knows.

In the most recent round of votes by the Monetary Policy Committee (MPC) at the Bank of England, the MPC voted by a majority of 8–1 to maintain Bank Rate at 5.25% on the 21st March 2024.

CPI Inflation, which is a major determinant of when interest rates might go down, currently sits at 3.4%, below the expected 4%.

The BoE said that:

CPI inflation is projected to fall to slightly below the 2% target in 2024 Q2

However, their biggest concern is that they don't want inflation to remain persistently above the 2% level, so they have been “restrictive” for some time by keeping the base rate at 5.25%.

Interest rates will inevitably fall eventually and the decision makers are hinting at sooner rather than later.

We expect that the earliest it will happen will be in the second half of 2024.

Here are 5 things to do before interest rates go down to help you stay ahead on your wealth-building journey 😀

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5 Things To Do Before Interest Rates Go Down

These tips are not one-size-fits-all as different people have different goals and are at different stages of their money journey.

Please take from it what you can and make decisions for the long term based on what goals you’re trying to achieve for yourself.

1. Buy Property 🏡

Assuming you can afford to, waiting for interest rates to fall before you get on the property ladder is not the best time.

If you’re buying as a first-time buyer or as an investor it’s best to do so ideally well before the rates fall as you can drive a much better bargain.

For example, the people who bought in the second half of 2023 would have made the smartest moves because there was maximum chaos then.

Although interest rates were quite high, it remained a buyers' market and sellers were slashing prices in the tens of thousands to sell.

Yes, they would have borrowed at a higher rate of interest temporarily, but the amount they borrow, which compounds over time, would have been a lot less.

Plus, they stand to benefit more from property price rises in the future because they bought when prices fell.

It's not too late as interest rates have not yet started falling as at the time of writing this post.

👉🏾 Lower interest rates lead to higher demand as people start to make a move, which will drive up property prices over time.

2. Pay Off Expensive Debts 💷

Falling interest rates usually translate to lower borrowing costs, which is good for business because it drives us economic activity and boost GDP.

However, on a personal level, if you have high-interest debt, such as credit card debt or variable-rate loans, consider paying them down to save on interest expenses.

The same goes for mortgages if your rate of interest is high.

Making mortgage overpayments in this scenario also makes sense as it gives you a guaranteed return and reduces the capital element of your debt, thereby improve Loan-To-Value ahead of a remortgage.

Please make sure that you have 3 to 6 months of an emergency fund before you consider overpaying a mortgage.

Recommended: The Real Cost of 35-year Mortgages

3. Invest in Stocks 📈

As interest rates fall, the relative attractiveness of stocks compared to fixed-income investments may increase.

Investors seeking higher returns may shift their focus towards stocks, leading to increased demand for stocks and a rise in stock prices.

👉🏾 This anticipation of rates falling is partly why the S&P 500 index is currently at an all-time high.

4. Fixed Rate Saving 💰

If you have the opportunity to lock in fixed-rate investments before interest rates fall, it may be advantageous.

Look for high-yield savings accounts or other alternative options that offer competitive rates.

According to Money Facts, the best 1-year fixed rate is currently 5.26% (this will change over time).

👉🏾 Ultimately, the goal is to get a return that exceeds inflation.

5. Assess Your Mortgage 📝

Start speaking with a broker now and assessing different rates if you’re coming up for a remortgage.

According to Money Facts, the best 2-year fixed rate is 4.69% and the 5-year fixed rate is 4.24%.

It will make sense to choose a 2 year fixed given the expected changes to interest rates.

However, what you choose will depend on your circumstances as some may prefer the security of a 5-year fixed after considering the fees and hassle of the remortgage process.

👉🏾 Ideally, aim to get a mortgage product without any overpayment caps. They’re available from high street banks (and others) via brokers.

Conclusion

Whether interest rates are falling or not, there is always an opportunity to grow or build your wealth.

Please make the decisions that work best for your current personal circumstances and long-term goals.

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What to read next above the interest rates and the economy and cost of living:

• 15 Ways To Improve Your Credit Score
• I Wish I Knew This Before Getting a Mortgage
• 5 Signs You're Living Above Your Means

What to watch next above the interest rates and the economy and cost of living:

👉🏾 Have you been waiting for interest rates to fall before making some big decisions? Comment ⬇️