The Guardian reported on 17th July that UK fixed-rate mortgage costs have stabilised. Financial data provider Moneyfacts reports that the average 2-year fixed residential mortgage rate is 6.78%, 5-year fixed residential mortgage rate is 6.30%. This is the first time in almost two months that the average fixed mortgage rates haven’t gone up. But they’re still pretty high… However, don’t let that put you off! We’ve said it before, the key to successfully investing is being able to adapt to an everchanging market. Here’s are a few property types that might just work, even with interest rates where they are.
HMOs
It’s probably no great surprise that we’ve started here. With homeowners now being directly affected by the rising mortgage rates, those who are coming to the end of their mortgage terms are having their monthly payments doubled in some cases. First time buyers are also holding off getting on the ladder in favour of rental accommodation, in the hope that rates come down. Naturally, these factors increase rental demand at a time when there is already a shortage in rental properties. Demand is increasing quicker than properties are becoming available, particularly in city centre locations. Our strategy of providing excellent, high quality, city centre accommodation is ideal in a market like this.
Title Splits
Investing in residential properties, such as apartment buildings or maisonettes, can be beneficial during high-interest-rate environments. As we’ve mentioned above, demand for rental housing often increases when borrowing costs are high. These types of properties, in the correct area can provide a steady stream of rental income and potential for long-term appreciation. They can also be sold off seperately for a profit.
Commercial Properties
High-interest-rate environments can present opportunities in the commercial property market. Re-purposing a commercial property such as a former office, a shop with flat above (shop and top) or a pub into residential units, may sound a little ambitious. Especially if it isn’t something you’ve done before. However, in the current market, it is proving to be a popular, and more rewarding, alternative to a standard buy to let strategy. However, carefully evaluate market conditions and potential risks, as rising interest rates can affect businesses' ability to lease or purchase commercial spaces.
Distressed Properties
High-interest-rate environments may lead to a higher number of distressed properties, such as foreclosures or properties in need of renovation. These properties can present investment opportunities for those willing to take on the associated risks. Purchasing distressed properties below market value is the ideal fit for a BRRR strategy or a flip.
Serviced Accommodation
Short-term rental properties, such as holiday lets or Airbnb properties, can be incredibly lucrative. These properties can provide higher rental yields compared to traditional long-term rentals. As travellers seek more affordable accommodations, short-term rentals can be an attractive option. Remember, before making any investment decisions, it's crucial to conduct thorough market research, assess risk factors, and seek advice from financial professionals. The best type of property to invest in will depend on your individual financial goals, risk tolerance, and market conditions at the time.
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