Interest Rate Rise in UK

The latest rise of interest rates will add more problems to the current soft market in UK. It will greatly affect the buy-to-let investors.

Due to the recent boom in the UK property market, the property values have increased. This is good news for existing property investors. However, it is not good news for first-time land owners. The boom has caused these green land owners to pay significantly higher purchase prices for suitable investment properties. First-time land owners have to choose carefully the buy-to-let mortgage with the lowest possible interest rate for their investment.

When interest rates increase, it creates a double squeeze on potential investors. The first being a reduced offer and the second, is that once an investor owns a buy-to-let property, higher monthly mortgage payments eat away at the potential financial returns.

Besides, higher interest rate also causes less money to become available to be borrowed. The amount that can be borrowed when buying a property to let out depends, amongst other factors, on how much rent the property generates, as well as the interest rate used by the lender to calculate the funds they are willing to offer. Higher interest rates mean lower mortgage offers and therefore higher deposits are required.” Some experts also reveal: “Investors should also be aware that there may be further UK base rate rises in the months ahead. Existing buy-to-let borrowers, whose mortgages are currently on discounted or variable rates, could also benefit hugely by having their current mortgage deals reviewed against the current investment mortgages available”