Are investor landlords doomed with the increase in interest rates? We think not!
In recent months, we’ve seen the base rate steadily increase by the Bank of England. Despite this making it more difficult for those on the housing market, this rate increase should only have a minimal effect on the benefits of investing in property.
As interest rates increase, property prices should fall alongside them. This will be due to a decreased demand from residential buyers. Therefore, buying whilst interest rates are high will mean the cost of your property will be substantially lower in this current economic climate.
Furthermore, the UK House Price Index shows that the value of a home on average has dropped to £285,009 from last September, which was at £292,404. This may result in more leniency on prices, meaning you can negotiate your offer.
If the interest rates drop back down after your mortgage term (usually 2-5 years), you will then have extra cash available monthly. Studies have also shown that it is more difficult for a first-time buyers to get onto the property ladder, and so the demand for rental properties has increased. This in turn has led to an overall increase in the average rent charged in the UK. Recent studies from Zoopla show that the average rent reached £1,120 in February 2023 – which is up from £1,010 a year ago, an increase of £10.9%.
We as a firm have partnered with ‘Hammock’ to offer our clients the chance to use specialist software targeted for landlords. This software has a live banking feed that will enable you to categorise your rental income and expenditure with ease and has additional features to flag any anomalies or discrepancies within your bookkeeping. If your tenant has missed a month’s rent, or you have an outstanding bill due, this will no longer slip through the net with hammocks managing agent features.
This is a cheaper option than a managing agent and will therefore increase your profit, making it more cost efficient to operate as a landlord in financial uncertainty.
If you would like more advice specific to your circumstances, please get in touch with us at PJCO!