Invest & Fund sees hints of market recovery
Invest & Fund has said that “we are closer to the end than the beginning” of the economic cycle, which could lead to a boom in the property market.
The peer-to-peer development lender cited Paul Volcker, former chair of the US Federal Reserve, who aggressively hiked interest rates to combat soaring inflation.
Invest & Fund said that while this led to a recession in the early 1980s, ultimately it brought down inflation and stabilised the US economy.
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“Volcker’s successful anti-inflationary policies led to a significant decline in interest rates,” Invest & Fund said in a blog post on its website.
“Lower borrowing costs made real estate more affordable and attractive to investors and homebuyers. This resulted in increased demand for property and a subsequent rise in property prices. Lower interest rates boosted the housing market. Many Americans could purchase homes with more favourable mortgage terms, stimulating home construction and sales.”
Invest & Fund said that this growth benefited both homeowners and the property development industry.
“Could we see the return to the boom period quicker than we think in the UK market?” the platform said.
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“One thing we know for sure is the mechanic of raising rates until the system is at breaking point is historically proven to work in combating inflation: raising interest rates reduces inflation by increasing the cost of borrowing; when rates are higher, businesses and consumers are less inclined to take out loans, which reduces spending and demand.
“This decreased need, in turn, lowers prices as producers face less pressure to raise them due to reduced consumer demand. With all that in mind, the flattening of the rate cycle we have seen may not signify that we are at the end; we aren’t anywhere near where we need to be on any metric. However, it may mean we are closer to the end than the beginning.”
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