Landlords are dreading a mortgage rate increase

AFS Team·5 August 2011·3 min read
Landlords are dreading a mortgage rate increase
Landlords feel vulnerable to mortgage interest rate rises and fear that they could drive them out of business, according to new research. The revelations come on the day the Bank of England’s monetary policy committee voted to keep official interest rates at 0.5% for a record 29th month in a row. The findings of a survey by the National Landlords Association revealed nine out of 10 of landlords consider a 2% mortgage interest rate rise would have a severe impact on their property portfolios - with more than half (53%) concerned such an increase would affect them ‘significantly’. Paying more mortgage interest would lead 8% of landlords to consider whether they could continue investing in property, while 6% would seriously think about giving up their business. Rates going up 1% would still have a severe effect on 80% of landlords - with three out of 10 (29%) fearing ‘significant’ financial problems. Around 73% of the landlords responding to the survey had a buy to let mortgage, while 47% had five or more mortgages. Half of landlords (49%) would like to see more lenders and greater competition in the buy to let mortgage market. David Salusbury, NLA chairman, said: "These statistics show how important it is for a landlord expanding their portfolio to construct a sound long-term business plan when considering buy-to-let properties. "The NLA believes that such properties can be a worthwhile investment and can help ease the current housing crisis by providing a source of much-needed housing, but landlords should ensure that they plan for the future and are mindful of any potential increases in buy-to-let interest rates." Meanwhile, 53% of mortgage brokers do not expect the bank rate to rise until some time in the new year, according to the findings of a poll by mortgage lender Kensington. Charles Morley, head of sales at Kensington: "While our research is not unanimous, there is a clear feeling that base rate is unlikely to rise before 2012.”