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Home News BREAKING: Landlords face higher mortgage costs as base rate rises by
0.5%
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BREAKING: LANDLORDS FACE HIGHER MORTGAGE COSTS AS BASE RATE RISES BY 0.5%

By
Nigel Lewis
-
22nd June 2023
2214
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The Bank of England has this lunchtime raised its base rate by 0.5% as the
venerable institution fights to bring down inflation, which yesterday was
revealed to be sticking stubbornly at 8.7%, way above the bank’s target of 2%.

Commentators and mortgage holders alike had hoped that any rise would be limited
to a quarter percent rise, but a majority of the BoE’s Monetary Policy Committee
(MPC) believe stronger measures are required to bring down ‘core inflation’.

“The MPC’s remit is clear that the inflation target applies at all times,
reflecting the primacy of price stability in the UK monetary policy framework,”
it says in justification.

The move is likely – but not guaranteed – to push up interest rates for new
landlord mortgages for buy to let properties, and make it more painful for those
who are about to come off low fixed rates agreed two or five years ago when
interest rates were much lower.



Seven members of the MPC including Governor Andrew Bailey voted to increase the
base rate while two said they’d prefer to keep it at 4.5%.

REACTION

Matt Thompson (pictured), head of sales at Chestertons, says:
“We expect the rate rise to have an impact on overleveraged buy-to-let investors
whose increased mortgage payments could lead to their investment making limited
profit or even a loss.



“This could result in some landlords deciding to offload their assets. At this
stage, we haven’t yet encountered homeowners who have been forced to sell up
but, if rates continue to rise, some owners may be
forced to review the situation and weigh up their options.

“At the same time, demand for properties in London continues to stay strong
as the capital remains a hotspot for a variety of buyer demographics including
international buyers.”



Alex Lyle (pictured) director of Richmond estate agency Antony Roberts, says:
‘Yet another interest rate rise, coming on the back of so many and with the
potential for more to come, creates further uncertainty, which is not good for
the housing market. 

“Although some parts of the country have proven remarkably resilient to
increasing interest rates, inevitably this is less the case the higher they go.

“This latest rate rise will give those buyers who were anxious anyway an excuse
to back out. Quite a few buyers and sellers are sitting tight until the autumn
in the hope that the situation will have settled down by then.”

Read the MPC decision in full.

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Previous articleFamous landlord to pay £166,000 legal costs after losing court
claim

Next articleLloyds Bank’s plans to build ‘thousands’ of rental homes prove over
optimistic
Nigel Lewis
https://www.landlordzone.co.uk/author-bios-nigel-lewis
Nigel Lewis is a property writer and editor with a 27-year track record working
for national newspapers, magazines, websites and also leading content media
agencies and portals. editor@landlordzone.co.uk



RELATED ARTICLESMORE FROM AUTHOR


News


EXPERT REACTION: WHAT WILL THE BASE RATE RISE MEAN FOR THE PROPERTY MARKET?


News


BANK RATE RISE – BANK RAISES RATE TO 0.75%



2 COMMENTS

 1. Steve Welburn 22nd June 2023 at 7:22 pm
    
    It beggars belief that the BOE keeps increasing the base rate in order to
    stop us overspending. How draconian!!
    Would it not have been prudent to warn the country first, sending many
    messages over a 3 month period before resorting to such drastic rate
    increases. I am lucky to be able to pass on the rate increases in most
    cases. I feel so sorry for my tenants, but as a Sole Trader I have
    absolutely no choice.
    Section 24 “Tenant Tax” should be reversed immediately or the funds
    collected via the landlord be paid back to the private tenants. Another
    Stealth tax burden created by Osborne.
    Sole Trader landlords paying more for their mortgages, will also have to
    consider where the funds will come from to pay HMRC come January 2024 as the
    interest element cannot be fully offset.
    It’s a mess that will not go away unless Section 24 is abolished during this
    turbulent time.
    
    Reply
    
 2. Paul Barrett 22nd June 2023 at 11:13 pm
    
    This isn’t the end.
    It isn’t even the beginning of the end.
    But it is perhaps the end of the beginning.
    
    BoE IR will be increasing to 10%.
    
    The BoE fails to realise that increasing IR won’t squeeze out spending.
    
    In case the BoE wasn’t aware there is a COLC.
    
    There simply isn’t excessive consumer spending.
    People are struggling as it is.
    
    To then add additional costs for mortgages just makes the COLC worse.
    
    The BoE IR increases are incompetent.
    
    Rather the BoE should have reduced IR ideally to zero.
    
    This could result in mortgages being about 2%.
    
    Even that would still mean people are struggling.
    
    If the BoE is to prevent mass repossessions then they need to instruct
    lenders to offer IO mortgages with NO repayment vehicle required and to
    extend mortgage terms to age 90.
    
    The PRA needs to be abolished along with S24 and the SDLT surcharge.
    
    The MMR also should be abolished.
    
    Reply
    




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