26th
Aug 2018
A property management company says that private landlords should take the option of remortgaging to counter the Bank of England' raising of the interest rates.
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The Bank of England's increase of the interest rate is 0.25% the highest rise since 2009 which will obviously affect landlords' profitability. What is more worrying is if the Bank of England decides to continue raising the rate of interest regularly, and the company is urging those BTL investors who are heavily geared, to seriously consider remortgaging.
Further research from the company has found that one third of landlords are paying over the odds on their mortgage, and interest rate increases could cause them major problems.
Head of financial services, Alan Kent, said: "We have already seen landlords who have had the same mortgage for years and are experiencing falling yields and the likelihood of further interest rate rises will only compound this situation. If a landlord is on a lender’s standard variable rate, then it is highly likely that this will increase with each interest rate rise resulting in an erosion of the profitability of the property investment."
He continued: "A decade ago the base rate was 5 per cent and lenders variable rates were typically 1-2 per cent higher, however through-out Q4 of 2008 and Q1 of 2009, there was a sharp reduction in the base rate but not a comparable reduction in rates charged to customers. It will be interesting to see whether lenders will be keener to pass on these interest rate increases in contrast to their reluctance to reduce rates ten years ago.
"Consumers, and this includes landlords and property investors, must ensure that they shop around to get the best rate for themselves. This interest rate cut, and any subsequent ones may provide a source of competition between lenders who wish to attract new business. It is important that landlords monitor their borrowing costs closely and shift lenders and rates where possible to give themselves the greatest opportunity for an improved yield on their investment."
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