Now is the time for landlords to review their existing portfolios and consider remortgaging to a lower, fixed rate buy-to-let mortgage, Andrew Turner, chief executive of Commercial Trust has argued.
He said this because of a variety of products in this competitive market, and the base rate being held at 0.75% yesterday, with Bank of England governor Mark Carney warning of possible interest rate rises in the future.
Turner (pictured) said: “The present window of opportunity for what may seem favourable buy-to-let conditions in a few months’ time, may be closing.
“For landlords with a buy-to-let mortgage on a variable or tracker rate, the implications of a rates rise or fall can change their annual payments by hundreds of pounds
“In an atmosphere where rates are almost at historic lows, the prospect of monthly payments increasing on a variable or tracker rate mortgage, should the Bank increase the base rate, will seem very unappealing.
“A fixed rate mortgage is safeguarded against base rate changes for the duration of its term, while variable and tracker rate mortgages might be susceptible to any changes. Mr Carney’s suggestion is that rates are more likely to go up rather than down.”
Moneyfacts has found that there are over 2,000 products available in the buy-to-let market now, a 12-year high.
Turner added: “A conversation with a specialist buy-to-let broker, can help to identify a clear strategy and the right type of buy-to-let deal for individual circumstances, faced with such choice.”
With a sluggish housing market, Turner said that tenant demand remains undiminished, as those unable to afford to buy a home, seek accommodation in the private rental sector.
He suggested for those with money to spend, the current environment may offer opportunity to invest in buy-to-let with lower house prices, soaring tenant demand and historically low interest rates.
Turner said: “I would suggest anyone holding off at the moment, faced with these facts, to consider what they are waiting for?
“The bigger question is how long current conditions will last? Mr Carney’s suggestion is that a change in interest rates is just around the corner. That could mean that the competitive deals currently available, may soon evaporate with any base rate change.
“So, whether you are a first-time landlord or considering remortgaging, while time is currently on your side regarding interest rates, how long will that last?”
By Michael Lloyd
Source: Mortgage Introducer