Mortgage rates have been a hot topic in the news and it’s tricky to predict what’s going to happen next. Here, we take a look at what’s been going on and whether it’s a good time to invest in a rental property.
What’s changed with buy to let mortgage rates?
As with residential mortgage rates, buy to let mortgage rates experienced a significant rise following the government’s autumn budget in September. This was due to a drop in the value of the pound which concerned lenders and resulted in mortgage deals being pulled and inflated interest rates.
More recently, average buy to let mortgage rates have reduced, although not to 2022 levels, and there are more products available. This means that landlords have more choice once again when it comes to buying their first rental, expanding their portfolio, or remortgaging an existing property.
How are mortgage rates decided?
The way that lenders set their mortgage rates initially begins with the Bank of England’s base rate. This base rate is the amount that the Bank of England charges other banks and lenders when they borrow from them. This in turn typically impacts mortgage rates as if the base rate rises, lenders will increase their rates too.
The base rate is reviewed 8 times a year by the Bank of England, and changing it enables them to influence the economy. For example, a low base rate encourages people to spend money, but this can then lead to inflation with products and services becoming more expensive. This is why the base rate can change many times across 12 months.
Is now a good time to grow my property portfolio?
Looking at current trends, it’s likely that buy to let mortgage rates will start to fall, but it’s uncertain how far they’ll drop. However, if you’re looking to expand your property portfolio you may find that this is a great time to do it as rental demand is high, meaning that tenants are easy to find. Due to this demand, rent prices have been rising which also suggests that purchasing a new rental property is a good investment.
It is also worth remembering that the past 15-years have brought unusually low interest rates, so the fact that they’re higher now doesn’t necessarily mean that landlords can’t expand and run successful property portfolios, especially when demand is so high.
If you’re looking for tenants or a range of property management services, contact our knowledgeable team today. We’d love to hear from you!