Gavin Richardson, from buy-to-let broker Mortgages For Business (MFB) has suggested that landlords who are thinking of re-mortgaging soon should act fast to lock-in the current rate.
Inflation (the rate at which prices of goods and services rise) reached 6.8% in July. Even though this number has gone down from the previous month and is expected to decrease further, it’s still pretty high. If it doesn’t drop more quickly, the Bank of England may step in to cool things down.
What’s the Bank of England Planning?: The Bank of England is planning to increase the “base rate” in September. The base rate is the interest rate at which the Bank lends money to other banks. If this rate goes up, the interest rates on loans, including mortgages, tend to rise as well. The Bank of England is considering increasing it by 0.25%.
Why Does This Matter to Landlords?: Higher interest rates mean that if you’ve borrowed money to buy a property (like getting a mortgage), the amount you have to pay back each month could go up.
Gavin Richardson’s Advice:
- If your mortgage deal is ending soon, consider getting a new fixed-rate deal now rather than later.
- Some lenders let you secure a new rate up to six months before your current deal ends.
- If a better mortgage deal comes along after you’ve agreed to a new one, some lenders let you switch.
- The idea here is to lock in a good fixed-rate now before rates potentially rise further.
Special Note for Some Landlords: If your mortgage rate changes with the base rate (known as a tracker or variable mortgage), you especially should consider fixing your rate. By fixing, you agree on a set rate for a certain period, regardless of how the base rate changes. If you don’t, you might end up paying more every month when the base rate goes up.
A Bit More About the Base Rate: The base rate has been increased 14 times consecutively, from a super low of 0.1% in December 2021 to now 5.25%. But if inflation keeps going down, this might be the last time it rises this year.