February 2016


Everybody that we speak with seems to be very busy at work, with strong order books, increased activity in both the building and the finance sectors and trust companies having to recruit more staff, so giving the impression that there is much more confidence in the Island, except perhaps for the retail sector which continues to take a battering from online competition. 


Estate agents have a good supply of property on offer and prices appear to have stabilised with, in some cases, the opportunity to negotiate a modest reduction.  How long this situation will continue before prices start to rise is difficult to gauge, and will be governed in part by demand, and also by the ability of lenders to match borrowers requirements. 


In the first days of January we have already seen further interest rate reductions being introduced by some lenders, whilst others have either cut fees or introduced cash incentives.  Whilst we may have limited choice of lenders in The Island, the range of rates and products is extensive – over 150 different options depending on the amount required to borrow against property value - so we are able to accommodate most borrowers’ needs. 


Another year has now gone by without the Bank of England’s base rate of 0.50% being revised. In the light of recent comments from the Bank of England, it is apparent that there will be no increase in base rate until well into next year, and this could result in further cuts being made by lenders in the next few weeks.  Some tracker rates are now higher than five year fixed rates, which just goes to illustrate the advantageous situation that all borrowers now find themselves in. 


Great news for anybody looking for a mortgage, but what about the investor?  It is said that for every borrower, there are seven people with funds to invest, which means there are a lot of very unhappy people around! The average rate on an instant access account in the UK/Channel Islands has fallen to 0.48%, whilst many bank accounts offer a paltry 0.01%.  At the time of going to press the best offshore rate that could be found was at 1.75%.


Looking at the stock market as an alternative form of investment does not seem to at present, unless you are an expert and prepared to take a degree of risk. So where else can potential investors put their money that might offer a realistic return? 


It is never too late to set up a pension plan which will give tax relief now and additional comfort in retirement. You can even pay certain types of existing pensions into your new scheme. Holding a diverse portfolio of assets is recommended and our financial services team at Henley Financial, will offer advice in this area.


The returns on rented property are good, although there will always be a management charge unless you look after the property yourself.  Our most successful investors have been clients who have purchased small units – bedsits or studio flats, which are easy to let and also comparatively easy to sell if you need the cash – with prices starting at around £125,000, and buy to let mortgages available up to age 80. Buying in Jersey or perhaps in the UK, where prices are much lower, is seriously worth considering. 


There is no point in hanging on to your precious savings if they give you no pleasure, which is the reason why so many people are now buying a second home to enjoy during the winter months.  French property is very good value at the moment, with bargains to be had in Brittany and Normandy, as well as much further south.  Why not try Spain, where banks have hundreds of repossessed properties that they are desperate to sell off? Or think further afield, to Montenegro, or even South Africa, where many Jersey residents have purchased in the past fifteen years.


A final option, and one that has been chosen by a number of our clients, is to lend out money to property owners, purchasers or small developers, who, since the introduction of the new lending regulations are no longer able to raise a mortgage from their own bank.  With interest rates in the range from 6% to 10%, and with all legal fees paid by the borrower, this is an attractive alternative to actually investing in bricks and mortar and avoids some of the costs of direct investment – such as stamp duty.

If you have any comments to make or wish to find out more, please contact   kerrie@mortgageshop.je


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