We all know that the true figure is alot higher as we have all felt it with our own pockets.

The good thing is (for me at least and all the other property investors who have debt) that even though I feel it in my pocket on my day to day spending it reduces the value of my debt.

If you are the other way round, with more cash than debt then I feel sorry for you. The government (or should I say the Bank Of England) is not putting up base rates because of their fearof sparking a recession so the interest you can expect to earn has not changed.

You cash in the bank is devaluing as it can no longer buy the same as it could in the previous month. I would start investing that cash, take on some debt and you'll be fine.

So inflation at 4.4% means wage rates will increase in line with inflation. If employers fail to do this then there will be some serious strikes going on. So we can expect wages to increase which is great as rents will increase also.

With increasing rents will mean increasing yields which will mean increases in property prices.

Also, wage increases increase a borrowers buying power. So if someones salray increases by £2,500 then they can afford roughly 4.25 times more to pay for a house as the bank will lend them an extra 4.25 x £2,00 = £10,625.

So all in all if you have actual debt which is greater than your cash balance then you are ok. If its the other way round I suggest you change this, unless of course deflation is on the way, then I am heading for the bunker.

I would like to point out that deflation has not happened in this country in my lifetime and is something the government ensures never happens. But it is still a risk.

Anyway, enjoy life in debt and good luck with your property pursuits.

Ajay

Join Ajay's daily newsletter

Get live property investment deals, free courses and property investment tools sent straight to your email inbox at no cost every single day.

Your Name:
Your E-Mail:

Posted on: 13th August 2008 @ 00:46:00