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The latest interest rate rise will place a strain on the general housing market for property owners. The base rate has not been over 5% since 2008.
In particular the home owners who decided to take advantage of the ‘stamp duty holiday’ a few years ago during covid and opted for 2 and 3 year deals at the time, might now be in a position where their mortgage repayments are increasing significantly and the value of their home may start to decrease.
Higher interest rates make it more difficult for people to borrow money, and overall that means they will spend less. If we all spend less overall, the prices of those items will rise slower. Slower price rises = lower rates of inflation.
Mortgage brokers* are urging people to look at deals prior to their current deal expiring, that way if you have an offer on the table that is on a cheaper rate, when it comes to the end of your deal you have options available (offers generally last around 6 months).
According to Zoopla, the average rent is around 10% more expensive than it was 12 months ago.
The short answer, ‘no’.
If the area you have rental properties is good and you conducted your due diligence, along with interest rates rising in line with the base rate there is still money to be made from property. Rents have increased dramatically over the last few years to counteract the increases.
Now, there might be landlords that are required to ‘sell up’ due to further cost increases, if they can’t increase the rent enough they will be forced to sell as the mortgage is no longer affordable. But this means that there will be less rental homes available, enabling current landlords that still have properties to be in higher demand (and therefore able to command higher rents). Also, this will provide ‘buying’ opportunities for investors with the landlords selling up and being ‘motivated’ to sell.
It was predicted that this would happen, we were expecting further increases in the base rate, so the fact that it happened ‘as expected’ should give us a sense of stability that predictions are correct and things will return to normal eventually, we just have to ride this out.
As the market stands right now, lending rates are still good value and there are no shortages in terms of demand for properties.
After a quick glance online at current rates, as an example Santander are offering a 4.83%, 5 year fixed deal for 60% LTV. HSBC is offering a 3 year fixed rate of 5.04% for 70% LTV, so there are still plenty of deals under 6%, but the media are suggesting these are not available. Get in touch with professionals* and find out more.
If you are considering adding properties to your portfolio, or want to get started as a first time investor, speak to one of our professionals about securing a property investment opportunity.
And remember, the fundamental benefits of investing in property will not change, based on a change in interest rates. Historically, property has provided excellent returns and low volatility over the longer term, regardless of the economic uncertainty. Periods of rising interest rates are always associated with periods of economic growth, property markets will be able to absorb the rate rises, just hang in there!
*Always seek expert financial advice from regulated mortgage brokers, financial advisors, etc.
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