Tag Archives: Break Even

Private Landlords Wary of Rate Rises Buy to Let News, Latest Articles, Mortgage News, Property Investment News

"A buy to let interest rate rise could be catastrophic for some"

Official bank rates will stay at 0.5% after the Bank of England’s monetary policy committee voted for no change for a record 29th month in a row.

They also agreed to keep quantitive easing at £200 billion.

Buy to let landlords are concerned that mortgage interest rate rises could drive them out of business, according to new research.

Around nine out of 10 of landlords feel a 2% mortgage interest rate rise would have a severe impact on the profitability of their property portfolios – with more than half (53%) confessing the rate increase would affect them ‘significantly’.

In fact the financial repercussions of paying more mortgage interest would force 8% to reconsider whether they could remain as property investors, while 6% would have to consider selling up, according to the findings of a survey by the National Landlords Association (NLA).

A rate hike of 1% on buy to let mortgages would still have a severe impact on 80% of landlords – with nearly a third (29%) expecting ‘significant’ financial problems to follow.

Know where you stand – check out our Number Crunchers to calculate the break even interest rate on your portfolio.

Around three quarters of the landlords taking part in the poll  (73%) had one or more buy to let loans, and 47% of them had five or more property investment mortgages.

Just under half of landlords (49%) strongly agree that the market would further benefit from more buy to let lenders and greater competition.

David Salusbury, NLA chairman, said: “These statistics show how important it is for a landlord expanding their portfolio to construct a sound long-term business plan when considering buy-to-let properties.

“The NLA believes that such properties can be a worthwhile investment and can help ease the current housing crisis by providing a source of much-needed housing, but landlords should ensure that they plan for the future and are mindful of any potential increases in buy-to-let interest rates.”

Meanwhile, more than half of mortgage brokers do not expect the bank rate to rise until some time in the new year, according to the findings of a poll by mortgage lender Kensington.

The survey showed 53% believe rates will start to rise in the first half of 2012, while one in four predict they will go up later this year.

Around 13% state rates will not rise until the second half of 2012, while 7% expect the rate to stay at 0.5% until 2013.

Charles Morley, head of sales at Kensington: “While our research is not unanimous, there is a clear feeling that base rate is unlikely to rise before 2012. “

Will your mortgage go toxic if interest rates rise? Latest Articles

The big worry for buy to let landlords and homeowners is how their finances will cope when mortgage rates start to rise.

Many landlords are coping with their finances because mortgage rates have dropped – but they have two concerns.  First, is how much extra tax they might have to pay if interest rates stay low and they have no losses from previous years to set off against rental profits. Continue reading Will your mortgage go toxic if interest rates rise?

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Why some mortgage lenders including Paragon Mortgages Stress Test at 9% or more Latest Articles, Question of the Week

Lenders and commentators – including the influential Paul Fisher, the Bank of England’s director of markets – are warning that the natural interest rate in a well-functioning economy is around the 5% mark.

With the Bank of England base rate stuck firmly at 0.5% since March 2009, many are worried that buy to let landlords have not subjected their property businesses to a robust stress-test to see what happens when rates go up. Continue reading Why some mortgage lenders including Paragon Mortgages Stress Test at 9% or more

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