Finance Tips

Many problems come into people’s life, and financial difficulty is one of those problems that often happen. It can be really frustrating facing the fact that you do not have enough money to fulfill your needs. You still have many bills to pay; and you just need extra money from reliable source. Borrowing some cash from debtors might come to mind but you have to know that it would only make you end up getting disturbed by annoying phone calls and paying high interest rates.

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Mortgage rates have a lot to do with how well the economy is performing. When mortgage rates go up, people can no longer afford to invest money in new properties. This, of course, brings a slow down to the building trade and it also means less money will be flowing through the economy.

On the other hand, when mortgage rates go down, more people are able to buy homes. The further down rates fall, the lower the income needed to buy homes. When homes are being bought, the building trade flourishes and this stimulates the economy in many ways.

Remember high interest rates?

It’s been 20 years since we’ve seen double-digit mortgage interest rates. Going back to the late ’70s and early ’80s, double-digit mortgage rates were the norm. It wasn’t until about 1985 after the Reagan administration had put an end to stagflation and the misery index that haunted the Carter years, that mortgage rates found buoyancy at around 7%.

Since that time, mortgage rates have fluctuated between 9% and about 5.5%. All in all, it has been a long stable interest rate environment that we have enjoyed over these past years.

Higher or lower?

Now, the question is where do interest rates go from here. By reading the charts, we will attempt to predict their future movement, just as if we were reading the commodities charts to get a handle on which way the price of soybeans were headed. Then, we’re going to make a prediction about another commodity that is sure to be shocking!

At this time, it is wise to make a disclaimer. First, no one can truly predict the future and second, any world event can change what the future looks like now in a heartbeat. Also, you can’t overlook the fact these unforeseen world events can happen out of the blue. With that behind us, let’s take a look at charts.

The past 18 years

Throughout the ’90s, interest rates on 30-year fixed mortgages ranged between 9% and 7%. At the time George W. Bush took office, the average 30-year mortgage rate was 8.75 %. From here, it eased downward steadily through the first George W. Bush term. It actually hit a low of 4.75% in late 2003. Here, interest rates ranged between 6.5% and about 5.5% for the next 3 years. This was an uncommonly stable interest rate environment and it was one of the reasons the housing market became red hot, and yes, overbought.

In 2006, the trend broke above 5.5% to about 6.5%, but rates never went any higher. Now, the interest rates are hovering around six percent and trending downward.

Reading the charts

The technical trader, that is, one who trades commodities by reading charts, would certainly believe interest rates, since they are heading downward, would have to once again test the low of 4.75%. It will be important to see if a double bottom is made at 4.75%. If this bottom is made, interest rates will go up.

Because of underlying fundamentals of the market, for instance the Fed trying to lower interest rates to stimulate the housing market, it seems much more likely interest rates will break through the 4.75% low once they arrive there. If they do, a new downward trend will be on the way. Just how much lower interest rates could get, is anybody’s guess. However, it certainly isn’t out of the question we could see 4% 30-year fixed mortgage rates sometime before this downward trend ends.

4%!

Historically speaking, 4% is a very low interest rate, but at this time it truly looks like we are much more apt to see 4% than a higher number, like 7%. So, for what it’s worth, this is my prediction. We will see the interest rate on a fixed 30-year mortgage somewhere down around 4% before an inflationary aspect of the economy takes over.

Where you think this inflationary aspect will come from? Well, here is another prediction and you may find it more astounding than the first one!

The impossible dream

It’s all over for the crude oil rally. Crude oil is overbought! There is no reason for crude oil to be trading above $100 a barrel. Like the tech stock boom of the ’90s and the housing market bubble of a couple years ago, it is a rally that cannot be sustained forever!

It’s anybody’s guess as to what the true market value of crude oil is right now. However, to think it is somewhere between $50 and $60 a barrel would be logical. However, when prices fall they tend to go through the true market value before they float back up to it.

If this crude oil market bubble burst follows the same modus operandi normal market bubble bursts follow, I can’t see why it is impossible to see $35 a barrel crude oil again; at least for a little while.

What would this mean for the price of gas? Maybe $1.49 a gallon? Well this may seem totally out of whack with what we’re hearing constantly coming from our news reports day and night, don’t think it can’t happen.

Back to reality

Certainly, there will be a time when $100 will not be too high a price for a barrel of crude oil. There will come a time when $3.50 is not too much for a gallon of gas. However, the charts are telling us that time is not here yet.

So, cheap gas, like the JFK, Ronald Reagan and George W. Bush tax cuts will stimulate the economy, and like the Bill Clinton Tariff agreements, it will make the cost of living lower which will make more goods affordable to the public. These things, though healthy for the economy, will bring on some inflation and this will break the interest rate downtrend.

I know these predictions seem pretty goofy and maybe they are! Still, my strategy is to believe they will happen and if they don’t, at least I’ll be happy believing them for now. Then again, if they do happen, we’ll all be happy!

In modern America, it is difficult to get through life without taking on some kind of debt. Most people cannot afford large purchases such as a house or education early in their lives, and so they take out loans to help them acquire these things earlier. Not all debt is harmful to your financial health, but it is important to make good decisions early in your life about what kind of debt to take on and what kind to avoid. Taking on too much debt with high interest rates can permanently destroy your hopes for a rich life and good retirement.

Good Debt

Loans which help you to invest in yourself or develop assets that don’t depreciate are good debt. Student loans, mortgages and loans for necessary medical procedures are all examples of debt that provides future returns in heightened income or lowered expenses. Loans for these items can usually be found with low interest rates, and when used wisely, can help secure your future wealth. Of course, you should always make sure that you will be able to afford the payments when they come due before taking out any loan.

Bad Debt

Consumer debt with high interest rates and no future return is the kind of debt that you should avoid. A good rule of thumb is that if you can eat it or wear it, you will not have any future return to show for it. Some credit card interest rates run as high as 25%, and if you only make minimum payments, you might end up paying more interest than principal over the decade it may take you to repay the card.

Try to evaluate debts as you would any other investment. Make your money work for you, and you will have a comfortable retirement to look forward to. But if you fail to carefully consider the kinds of debt you take on, your hard work will go towards paying credit card companies rather than yourself.

Over the years the UK has become a nation that pretty reliant on paying for purchases on plastic, whether debit or credit card, saving us the hassle of having to carry cash around, make countless withdrawals from cash machines, or write out one cheque after another to make purchases.

Paying by card for purchases is a very convenient and easy way to shop, and save you both time and hassle. Paying by card also makes it easy to make purchases online or by phone, both of which have become popular ways to shop for anything from groceries and holidays to clothes, gifts, and more.

When it comes to which card to use for making purchases preferences can differ from one consumer to another, and there are pros and cons to using both debit and credit cards. Both offer ease and convenience, but there are some points to consider when deciding whether you are better off shopping with a credit card or a debit card.

Credit cards

Credit cards enable the consumer to enjoy credit up to a specified limit, and depending on the card can also offer other benefits such as extended interest free periods, purchase protection, rewards points, cash back, and more.

Pros of credit card use

Being able to pay for purchases without carrying around cash or writing cheques Being able to shop online or by phone Being able to purchase items and enjoy interest free credit for a specified period Being able to spread the cost of purchases over a long period Being able to enjoy credit up to your specified limit making it easier to buy the things you want without having to wait and save up Being able to benefit from rewards (subject to card used) such as cash back, rewards points, or air miles Great choice of cards to suit most needs and circumstances, including for those with poor credit to help them to rebuild their credit
Cons of credit card use

The risk of getting into high levels of debt that becomes unmanageable Risk of credit card fraud Being charged often high interest rates on balances that are not paid in full each month
Debit cards

Debit cards are usually issued by your bank, and these enable you to enjoy the convenience and ease of using plastic to pay for purchases, but you must have the necessary funds already in your account before you can spend on your debit card. You can enjoy some benefits with your debit card such as extended purchase protection and emergency card replacement, although you should check the terms attached to your particular bank in order to see exactly what sort of benefits you have.

Pros of debit card use

No risk of getting into debt, as you have to have the money in your account in order to use the card Ease and convenience of paying by card without the need for cash or cheques Being able to shop online or by phone Extended warranty on purchases with many debit cards
Cons of debit card use

No credit facility so you cannot spend unless you already have the funds Risk of debit card fraud No facility to spread repayments on purchases No additional benefits such as rewards or cash back

Turkey has many of the ingredients of an excellent investment location as well as being popular tourism destination with low real estate prices, buy-to-let and a strong re-sale market.

Low Real Estate Prices

The housing market in Turkey was held up behind Europe as a result of the difficulty of obtaining mortgages. The majority of real estate purchases until recently were funded through inheritance or savings, which set a limit on the flourishing property market simply by not being affordable. The Turkish Government is committed to strengthening the mortgage market, which is an important step because short loan terms and high interest rates mean that at the moment only 3% of housing finance in Turkey currently stems from bank credits.

Turkey approves a new mortgage law this February (2007). This new law is expected to be enacted in May 2007. Provision of mortgages with low interest rates will make housing more affordable and cause house prices to head upwards.

The government of Turkish law was passed in January 2006, and confirmed the right of foreigners to buy property under 2.5 hectares in size for personal use or business. It is now possible for foreigners to obtain a local mortgage, further encouraging this emerging market.

Strong Resale Market

Turkey is getting richer, and house prices will grow accordingly with the increasing wealth of the country. The Turkish economy grew by 9.9% in 2004 alone, the highest recorded growth that year within an OECD country. Morgan Stanley’s global economics team believes the Turkish economy will continue to outperform the rest of the world, as the growth rate of real gross domestic product (GDP) accelerates from 6.2 percent in 2005 to 6.5 percent in 2006 and then on to 6.8 percent in 2007. Turkish population growth is around 2% per annum with 70% of the population younger than 30, and this is creating a very strong local market with good purchasing power. Investors would not be reliant on international investors for re-sales, hence strong internal property market demand should increase.

Foreign Investors

Turkey has received a large amount of foreign investment. This investment is being used to rapidly improve Turkey’s infrastructure. Property funds based in Europe and the Gulf are also pouring money into the country, with Dubai a particularly heavy investor in Turkey as an attractive destination. Corporate investors are creating new resorts, golf courses and other tourist facilities, while public funds are targeted at improving roads and airports. These are clear indications of a growing tourist economy that will greatly boost capital growth for today’s property investments. Huge golf tourism is evolving in Antalya-Belek, which will increase the value of any investment in that region.

Strong Buy to Let market

Over 25 million tourists visit Turkey each year, boosting the property market and creating strong “buy to let” possibilities. Gross rental yields in Turkey vary from moderate to high. Properties in major city centres offer yields of 7.6%, while property in coastal areas can yield from 13% up to an impressive 16%. The low cost of living and affordable and frequent flights from most European cities are making the country an easy place in which to have a second home.

All in all, Turkey has a great deal to offer to buyer – be it for investment, retirement or just a holiday home.