The current buy to let market poses a few challenges for landlords, but rising mortgage interest rates are the leading cause for concern. Our latest blog offers helpful advice for landlords concerned about their buy to let finance options and how you can navigate rising mortgage interest rates.
Amidst increased legislation and further tax implications for property investors, landlords are feeling the pressure most from rising mortgage interest rates.
You may be nearing the end of your fixed-rate term, likely having enjoyed the historically low pricing we saw throughout the pandemic. Or perhaps your previously competitive variable or tracker rate has increased significantly over the last year. Either way, you’re now faced with significant increases in your monthly mortgage repayments, negatively impacting your buy to let income.
As it’s more important than ever to take stock of your property investments and examine the finance options available to you, this blog will explain:
- Why buy to let mortgage interest rates have increased
- When we expect BTL mortgage rates to decrease
- What you can do to help protect your buy to let rental income
Why have mortgage interest rates increased?
Uncertainty in the money markets drives up SWAP rates, which are what mortgage lenders pay to other banks and financial institutions to borrow money for a fixed period of time.
When SWAP rates are higher, mortgage lenders have to increase product pricing to maintain profit margins (usually 2-2.5%). As such, the ongoing market instability caused by the Russian invasion of Ukraine, the cost-of-living crisis, and international economic activity (for example, US Inflation) have all played a part in the changes to mortgage rate pricing.
To see the latest SWAP rate activity, visit our money markets page here.
When will mortgage rates go down?
When SWAPs remain high or increase, we expect mortgage interest rates to follow suit.
Until UK and worldwide inflation reduces, we’re unlikely to see interest rates significantly decrease, especially to the competitive lows we have grown used to. The expert view is that interest rates will remain at these levels for at least another year before we see any substantial softening.
It is worth speaking to a broker to see what rates are available to you. Mortgage lenders constantly review product offerings to find ways to stay competitive, such as Limited Edition ranges or other incentives like cashback.
Your mortgage options
To help mitigate the stress of rising mortgage rates, it’s worth looking at your current property investments and assessing ways to maximise your returns.
One easy way to do this is by completing a Property Portfolio Review. After reviewing your current circumstances, your broker can discuss ways to boost your property investments for a more efficient portfolio.
Conducting these portfolio health checks can be a quick and easy way to maximise your cash flow. For example, you may release equity from one of your properties to fund a deposit for a purchase and diversify into a new, high-yielding property investment type. Or, you may be able to capital raise sufficient funds to pay off a property on a higher-mortgage interest rate to reduce your monthly repayments.
Another option may be consolidating your debts to reduce overall borrowing across your portfolio. Your broker will be able to determine whether taking just one portfolio loan instead of different mortgage rates for each property is best suited for your circumstances. An experienced broker will be able to review your options to help you find ways of maximising your current property investments.
Should I remortgage now?
It’s understandable that with rising interest rates, property investors are putting off their remortgage plans. However, lender SVRs currently range from 7.5% to 11%. Despite the mortgage interest rate increases, these are still much higher than you will likely secure with a new mortgage product.
Many property investors put off remortgaging as they expect a stressful process with lots of fees. These are just a couple of remortgage myths that we hear, but they should not deter you from saving money by securing a new rate. Your broker can look at securing you a new deal up to six months in advance, and most lenders (although not all) will allow you to switch to a better rate before completion if one becomes available.
What is a product transfer?
Depending on your circumstances, a product transfer may be your most suitable option. With a product transfer, you take a new mortgage rate from your existing lender, allowing for a much quicker and hassle-free process.
It’s worth having a broker review your product transfer options first to see if this is the most competitive option for you, as a product transfer will limit your rate options.
What will my mortgage repayments be?
There are plenty of useful tools available online to help get you started with your next property finance plans. For example, you can review what types of rates you could access with our Buy to Let Mortgage Calculator.
Alternatively, you can calculate what your mortgage repayments will be when you secure a new rate using our Mortgage Repayment Calculator. This is particularly helpful for landlords looking to plan ahead with their finances.
Speak to an expert
Finally, whilst we may be biased, we highly recommend speaking to an experienced whole-of-market mortgage broker. Our expertise in the buy to let market means we can advise and support you through your property investment journey, and source you a product that best suits your needs.
We also have access to specialist lenders that, as a borrower, you cannot approach directly. Our experience in the buy to let space has helped us to develop key relationships with some of the most prominent lenders in the market, with dedicated underwriters and business development managers.
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2nd August 2023