Current predictions for more interest rate rises

Posted by Mark Lloyd, Property Mastery Academy on 8 October 2018 | Comments

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After August's interest rate rise, things were back to normal in September when the Bank of England kept things on hold. And despite the increase in inflation from 2.5% to 2.7%, rates are not expected to rise again until next year.

uk interest rates rise

In fact, following the hike to 0.75% in August, predictors are now forecasting that rates will go up more slowly than previously expected over the next three years.

How did the rise impact landlords?

Research from letting agent Upad suggests 50% of landlords were on fixed rate mortgage deals, so they didn’t feel any impact from the interest rate rise as their repayments stayed the same.

In fact, some believe that landlords will benefit.

James Davis, founder and chief executive of Upad, said: “This isn’t just about mortgage interest rates - it encompasses so much more of the housing market. On the one hand, there’s an ongoing lack of affordable housing for purchase which maintains a level of buoyancy in the rental market. At the same time, this small rate increase could knock confidence in the housing market, meaning people chose to rent for longer. Either way, I believe landlords have nothing to fear.”

Mortgage lending dropped

Figures show that mortgage lending fell in Britain in the month before the Bank of England raised interest rates. The industry body UK Finance said the number of mortgages approved for new house purchases dropped by 4.3% in July. This is compared to 39,584 the same month a year ago.

However, as Moneyfacts points out, rates are still very low. At 2.53% the average two-year fix is still considerably lower than the 4.88% in place in February 2009, when interest rates were last more than 0.5%.

Landlords seemed undeterred by the raise. According to UK Finance: Mortgage Trends Update, 12,600 new buy-to-let remortgages were completed in June 2018. That’s the same as in June 2017.

A subdued housing market?

House price growth has been slowing across the country, and property values have actually fallen in London for the first time since the financial crisis.

The Royal Institution of Chartered Surveyors reports new buyer enquiries are pretty flat. However, some feel this is just as much to do with no-deal Brexit fears as it is to do with interest rates.

The Office for National Statistics reported that the north-east is the only region where house prices are yet to surpass their 2008 levels.

Houses are more affordable in the north

But while the market in London and the south is fairly inactive, things look livelier in the Midlands and north. Figures indicate that buying property in the north-east region has become more affordable in real terms over the past decade.

“There is a distinct divide between the north and south of the country when it comes to house-price growth in relation to wage growth, which has become even more pronounced since the financial crash,” said Tanya Jackson of Yorkshire Building Society.

It may be worth casting your net further to pick up some profitable properties for your portfolio.

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