Last week, the BBC reported hat nearly 800 mortgage deals were pulled amid uncertainty over interest rates. That’s nearly 10% of UK mortgage deals!
It comes after higher-than-expected inflation figures raised forecasts of how much UK interest rates will go up. The next Bank rate decision will be announced on the 22nd June.
Why so much volatility?
Mortgage rates suddenly rocketed after last September’s mini-Budget which triggered market uncertainty and sent the pound crashing to historic lows. At the time, major lenders including NatWest, Barclays, Halifax and Virgin Money, all pulled deals and brought them back to the market at higher prices.
While mortgages costs have undergone a correction since then, many lenders have been edging up the cost of deals as interest rates continue their relentless climb.
What does it mean for homeowners?
Those on fixed-rate deals, where the interest rate is locked in for, say, two or five years, won’t see any difference in their monthly payments. However, when the deal expires, available mortgage deals are likely to be much more expensive.
What does it mean for the investors and the property market?
Nationwide’s house price report, published on 1 June, showed prices fell by 3.4% in the 12 months to May – a steeper drop than the 2.7% posted in April. On a monthly basis, prices declined by 0.1%.
In essence, it’s likely to that there will be an ever-increasing demand for rental properties and HMOs. Given that rental properties are already in short supply, as demand increases, so will rent prices.
This causes a slight dilemma for existing BTL landlords as to whether to “stick or twist”. Is this increase in rent enough to offset the increase in interest rates? Or it more sensible to take out the money and invest into something with higher cashflow?
At Brentor Property we specialise in high cash flowing strategies. One of our favourite strategies is the HMO – The best bit? It is all but recession proof!
Take a look at our post here to find out why.
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