Landlords urged to consider the impact of rising rates

Nia Williams

October 29, 2013

According to the tenant eviction and rent recovery specialist, many landlords have been attracted to the sector recently by the guarantee of high yields and rent prices on offer as more and more people opted to rent rather than buy.

Indeed, Landlord Assist’s managing director Graham Kinnear believes that many landlords who were new to the market opted to borrow more from lenders following countless media reports of a buy-to-let bubble and reports of £50 a day property price increases.

But with the Government-backed Help to Buy scheme helping thousands of tenants to finally get a foot on the property ladder, landlords could see the growth in the rental sector finally slow down, leading to less demand and a small drop in rents.

Subsequently Landlord Assist is warning landlords to carefully consider their business strategy and understand how a recovering property market can impact their business.

Kinnear said: “It is impossible to estimate how long the growth in the private rental sector can be sustained, especially now that the Bank of England has revised its outlook and reported that interest rates could go up sooner than they initially thought due to the UK showing a stronger than expected economic recovery.

“Should the Bank of England raise the interest rate over the coming months, investors who took out a buy-to-let mortgage could see their repayments rise at the same time as a recovering property market could force rent prices downwards and see more tenants move away from the private rented sector towards home ownership.”

Stephen Parry, commercial director at Landlord Assist, added: “It is important that landlords carefully consider how current market conditions and a rise in interest rates could impact their business.

“Landlords, for instance, who have multiple properties on tracker mortgages may be better remortgaging to a fixed rate so that any rise in the interest rate or unexpected price hike from their lender doesn’t leave them facing financial difficulties.”

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