As many industry experts anticipated, the Bank of England has just increased Base Rate for the third time this year. What does this mean for buy to let mortgages, and how can property investors manage and prepare their investments amidst this ever-changing market?
In March, the Bank of England increased the Base Rate (BBR) to 0.75%, the highest level since Boris Johnson sent us into lockdown in March 2020. The BBR rate has now risen again, and for the first time since March 2009, is now 1.00%, a 13-year high.
Just as in March, the hope is this Base Rate increase will help curb inflation, which has reached 7% much earlier than expected. With the ongoing cost-of-living crisis due to energy bill costs, increases in National Insurance tax, and the ongoing war in Ukraine, many now expect inflation to continue rising into the latter half of this year. At a 30-year record high, it’s no surprise that the Bank of England keeps attempting to slow the rate of inflation; however, so far, we are yet to see much pay off.
How will this increase impact the mortgage market?
This BBR increase will undoubtedly have a knock-on effect on SWAP rates, which are the prices that financial institutions pay each other to borrow money. To keep up with these cost increases, borrowers can expect mortgage rate rises to follow the same trend. Lenders frequently review their offerings to keep in line with the market and maintain profit. However, with so many recent changes, lenders have had to do this more often, meaning the amount of time a mortgage rate is available is considerably shorter than usual, at just 21 days. Furthermore, this latest BBR rise will force many lenders to make more significant interest rate increases than we’ve previously seen. As such, brokers and property investors alike are struggling to secure their desired product in time, adding only more stress to the mortgage application process.
There are measures you can take to try and prevent this from happening to you. Having a dedicated broker on your case will help you get all the correct documentation in order ahead of your application to facilitate the process. They will also be able to guide you in the correct direction should you find yourself in the unfortunate situation of your rate being pulled from the market.