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Personal Finance: Brian Tora

THERE IS something of a good news/bad news feel to the investment world today. Amongst the good news is the fact that house prices are rising strongly, although the pattern is by no means uniform.

But you only really gain if you own residential property as an investment or you are anticipating trading down. Meanwhile, a strong housing market may encourage the Bank of England to put up interest rates, with all the side effects that can have for business and markets.

Then again, higher interest rates are not necessarily bad news. More people rely on deposit interest in this country than in, say, the US. And higher interest rates could mean better annuity returns.

But before you sell all your equities and place the money on deposit awaiting the opportunity to buy gilts on double-digit yields, a cautionary word: this time is different. Sure, markets will fluctuate, but do not anticipate the same volatility as in the past.

Back in the 1970s we saw base rates travelling between 5 per cent and 15 per cent - in both directions. Admittedly both these extremities have been touched in the 1990s, but the Government has got the message.

So where do you go for income? Gilts are the safest bet, but I am afraid you will have to content yourself with yields no more than 5-5.5 per cent.For the more adventurous, there are products offering even higher yields based upon the derivatives market.

Brian Tora is Chairman of the Greig Middleton Investment Strategy Committee