Unless you’ve been living in with your head in the sand, (which properly doesn’t sound like a bad idea at the moment), you would have heard about the soring interest rates and mortgage deals being pulled by banks and building societies.
Last weeks mini budget from Kwasi Kwarteng left hundred of mortgage deals being withdrawn as banks and building societies try to take on board how it has altered the outlook for interest rates.
On Tuesday morning there were 3,596 residential mortgage deals available, 284 fewer than before the sharp fall in the value of the pound on Monday morning, according to data firm Moneyfacts. At the end of last year there were 5,315 products.
“The future is certainly looking bleak when the biggest lender in the UK pulls a big selection of their products on offer,” says Jamie Lennox, a director at Dimora Mortgages. “The uncertainty around the risk of an emergency rate rise is likely to see other lenders withdrawing products or increasing rates dramatically until they know the extent of how this all pans out.”
In an attempt to get inflation under control, the Bank of England (BoE) recently increased the base interest rate, but what does high inflation and rising interest rates mean for buy-to-let landlords?
The negatives of inflation for landlords
Like all businesses, higher inflation has its downside, the same applies to landlords but like all costs, it can be managed.
Generally speaking, higher inflation means higher maintenance and insurance costs.
An increased chance of tenants in rent arrears or tenants being unable to pay bills.
In the long-term, fixed-rate mortgages will become more expensive to fix because of increases in the base rate.
The benefits of inflation for landlords
Higher inflation doesn’t necessarily mean doom and gloom for landlords, it can sometimes benefit homeowners and landlords as it means an increase in equity and a higher future property sell price.
Ever-increasing house prices also lead to an increase in demand for rental properties as people looking to buy a property may delay purchasing plans due to higher prices and steepened competition. Uncertainty in the market generally leads to an increase in households looking for temporary accommodation.
Inflation provides an opportunity for higher rental yields for landlords as landlords and agents increase rentals to reflect that of the market. It is especially beneficial for landlords who have no debt or mortgage against their property
Managing higher interest rates
With interest rates no longer at a record low, what can landlords do to keep mortgage costs under control?
shop around for the best mortgage products – you may have to switch lender but it could be worth it financially
look for fixed rate deals of two or five years as the base interest rate is likely to keep rising for the foreseeable future
work with a specialist buy-to-let mortgage broker – their knowledge of the market and strong relationships could save you a significant amount of money
Managing rising costs
Keeping costs down is tricky at the moment, but here are some practical things you can do to save money in the long run:
get a range of quotes for maintenance work – doing your research can increase your chances of working with reliable and affordable tradespeople
inspect your property regularly – picking up on small problems before they escalate could help you to make big savings on costly repairs
build relationships and communicate regularly with tenants – getting ahead of any problems such as rent arrears or unpaid bills can help you to minimise their impact
Has the interest rate hike and mortgages being pulled affected you? Let us know in the comments below. We’d love to hear from you
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