The history of buy to let interest rates

Hi James

May I suggest you look at this another way.

It is very easy to look at the history of Bank of England base rates – see >>> http://www.bankofengland.co.uk/boeapps/iadb/repo.asp

For historical LIBOR rates see >>> http://www.moneycafe.com/personal-finance/3-month-libor/

Do bear in mind that mortgage lenders add a margin to these figures.

SVR’s or standard variable rates are set at the discretion of the mortgage lenders. Beware of rates that do not track Bank of England Base Rate or LIBOR as a lender could simply increase the rates to exit the market.

To calculate viability and break even interest rates you feel comfortable at I suggest you use our Landlords Calculator – see >>> https://www.property118.com/landlords-buy-to-let-property-investment-strategy/calculating-rental-yields-and-returns/

Historic customer paid interest rates may be misleading, because of the increase in cost of borrowing for banks since the credit crunch.

Banks have had to recapitalise under instruction from the Bank of England. What that means is in 2007 for every £1 a bank held they were lending out as much as £75. This ratio is now roughly half that so the cost of lending money has greatly increased and the cost of banks borrowing on the money markets since the days of securitisation has gone up as well.

Therefore although you may be paying the same rate now on a BTL the margin above Bank base rate is much higher.

If the economy was to improve enough for Bank Base rates to be increased to stop demand lead inflation it is possible that with confidence improved the margins on lending may decrease and the end rates paid by borrowers stay the same.

This is only one potential scenario though. If anyone tells you that they know what will happen to the cost of borrowing in the long term they really don’t understand the unpredictable nature of the world economy we are living in.

My only helpful suggestion, based on the fact I have no idea what the future holds for us, is surely it is safer to have the money in your bank account than tied up in equity you can’t get at. Don’t forget you can always pay it back later.

Neil makes a very good point regarding the ability to pay money off if you hold cash. It all comes down to attitude to risk in terms of the amount of cash you hold in relation to debt. It also depends on many other factors. To read my strategy please see the Advice section of this website.
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James, if you ever manage to get the data please post it. I like your mechanistic approach and indeed I have also wondered what would happen to BTL rates when bank rate starts to rise. The 10year+ bond yield curve at 3-3.5% (cf 0.5% for 1 year) is a good starting point, If BTL margins remain the same you could be looking at 7.5-8% in 10 years time. I test my properties against that – but I allow my rents and costs to inflate over the period too.