Buy to let landlords are concerned that any rise in mortgage interest rates could significantly impact their lettings businesses, according to a new survey by the National Landlords Association (NLA).
This news comes just after the announcement that the Bank of England will not be altering the 0.5% base rate – for a record 29th consecutive month. The monetary policy committee also voted to keep quantitative easing at £200 billion.
The survey showed that for nine out of 10 landlords, a 2% rise in interest rates would negatively impact the profitability of their property portfolios. More than half of these (53%) claim that the impact would be ‘significant’ and 8% believe they would be forced to reconsider continuing as a property investor.
Even if interest rates on buy to let mortgages went up by 1%, the majority of landlords (80%) believe that they would be severely impacted. Almost a third (29%) would expect ‘significant’ financial difficulties.
Of the landlords participating in the survey, around three quarters (73%) were repaying one or more buy to let mortgage, and almost half (47%) had taken out five or more loans.
Around half of those surveyed believed that the market would benefit from more lenders and more competitive product offerings.
David Salusbury, NLA chairman, warns that the survey shows how important it is for landlords to have a long-term business plan, before embarking on any property investments.
“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,” he said.
Mortgage brokers, however, do not expect the Bank of England base rate to move until next year, according to new research by mortgage lender Kensington.
Just over half of the respondents believe a hike in interest rates will happen in the first half of 2012. A quarter predict a rise sometime towards the end of this year.
Around 13% are expecting rates to stay the same until the second half of 2012, while 7% predict that we won’t see a rise until 2013.
Kensington’s head of sales Charles Morley said: “While our research is not unanimous, there is a clear feeling that base rate is unlikely to rise before 2012.”