Earlier this month, the Bank of England (BoE) increased interest rates for the first time in over ten years. So, what does this mean for buy-to-let? And can landlords mitigate the rise?
London estate agent Portico asked finance expert Capricorn Financial for their advice.
Unfortunately, landlords are already seeing their profits decrease, as a result of recent tax changes from the Government and changing legislation. The recent interest rate rise will simply add on more costs.
However, Mark Lawrinson, the Regional Director of Portico, says that landlords can mitigate the hit by cutting their interest costs. He explains: “Buy-to-let mortgage interest rates have dropped dramatically in recent years, so deals currently on the market will be a lot better than products arranged a few years ago. It’s sensible, therefore, to shop around and remortgage. That being said, landlords will now have to consider the new PRA [Prudential Regulation Authority] rules.
“With large increases in property prices in London over the last five years, another tip is to get your rental property re-valued. This will make your lender recalculate your LTV [loan-to-value ratio], and a lower LTV means a better interest rate and a larger choice of lenders.”
Capricorn notes that there are over 30 mortgage lenders currently in the buy-to-let arena, each taking into account an individual landlord’s exposure, portfolio, income and rental income on the property in question.
These top tips will help you mitigate the interest rate rise and protect your finances when looking for a new mortgage or to remortgage:
- Calculate whether upfront fees will make the mortgage more expensive over the whole term, even if the loan has a lower rate – a higher rate with no upfront fees may actually be cheaper.
- Look out for cashback features, as these may make the loan cheaper over time as well.
- Put down as high a deposit as possible, to enable the lender to offer the best rate available.
Before making any financial decisions, it is advised that you take legal and tax advice.
We are proud to be partnering with Portico for its London Landlord Seminar tomorrow (Wednesday 22nd November 2017).