Tuesday, August 30, 2011

Time to get out

Buy to let property investment will be hit by rise in interest rates

Any small interest rate rises are forecast to hammer buy-to-let landlords and the same time as cuts to housing benefit are making many of them to look at ways to kick out tenants who can't entirely fund themselves. Quote: "31 percent of private landlords agree or strongly agree that they are worried about their ability to repay should buy to let mortgage rates begin to rise." The sooner BoE interest rates get back to something in the region of four-five per cent and mortgage rates around seven-eight per cent, the better. It'll shake out the Johnny-cum-lately greedies and maybe then house prices will have a better chance of returning to realistic levels

Posted by stuartking @ 08:20 PM (1518 views)
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2 thoughts on “Time to get out

  • What interest rate rise? Last time I checked, Merv all but promised no rate rises until at least 2013. Even then we’re not expecting a rise – he just wasn’t willing to predict that far ahead.

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  • Yes, there doesn’t seem to be any interest rate rises for the foreseeable future but I thought it interesting the figures they were quoting which suggest there are many BTLers heavily indebted and whose dream of retiring with a property-funded pension will go up in smoke when eventually interest rates do rise. These BTLers could also struggle when the new housing benefit rules come into force, next April is it? Some of the property commentators, including ARLA, are saying the BTLers will stop renting to anyone claiming benefits . If so, they are going to find it increasingly difficult to keep up occupancy levels. If they are so close to the margin should interest rates rise that they’ll be in financial difficultly, then losing two, three or more months rent per year is equally going to hit them hard.
    Even where I live, the South Hams, it is not unusual to see private properties on the market for rent for several months. I guess most tenants on housing benefit are probably long-term tenants – they don’t have the income that gives them any chance of buying – whereas those who can afford the rents without resorting to taxpayer-funded benefits are more likely to be looking for somewhere to buy and are less likely to be long-term tenants.
    Could be though the ARLA’s comments are scaremongering, trying to put leverage on the government to modify its housing benefit plans to suit its supporters – ie hoping the government will relent and continue pouring billions into the pockets of the BTL brigade.

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