What will be the effects of the rise of base rate for landlords in the UK?

What will be the effects of the rise of base rate for landlords in the UK?

Mark Carney, the Bank of England governor said that an increased interest rate of 0.25% is ‘drawing closer’. However, the exact timing of the first rise could not be predicted depends on the economic data. The last rise in the UK Bank Rate was increase to 5.75% in July 2007. Some analysts predicted this could have come at the turn of the year, or since the second half of 2016.

From the table below it shows what might happen to a national mortgage on the basis of average mortgage rate raise from 3.11% to 3.36% with a rise of 0.25%.

Loan size                Existing monthly repayment                    Repayment rise

£50,000                                £491                                                      £6

£100,000                              £982                                                      £13

£150.000                              £1,474                                                    £19

£200,000                              £2,456                                                    £25

This is a bad news for households who have to pay mortgage or debt. Households need to look at their finances now, in order to make sure they can bear the higher mortgage costs.

From PwC (2015) shows landlords will face loosing money when the Bank of England starts to raise the base rate. People may sink their money into property because they were getting no interest on their savings in the bank or following the financial crisis, therefore, they tend to reply on rental income.

For the government trying to help the first-time buyers and this change may only affect one in five of landlords. Nevertheless, the landlords which own more than one property will be hit.

Rising interest rates will affect tenants, as many private landlords will push the increase tax on their renters. The biggest problem will be the difficult for young to buy and rent property due to the higher repayment and rent.

After all, the policy will starve the rental market overall. However, it is a wise idea of finding a letting agency offering landlords a fix term rental income. Here at Anthea Lettings we provide 2-5 years guaranteed rent scheme without void periods. This would help private landlords to maintain rental income in the future and ease your financial burden. If you are interested and looking for more details please give us a call at 020 7700 0021 or email anthealettings@hotmail.com.