News headlines have been dominated by base rate rises so far this year, and the end of last year, too.
With the latest news coming out of the Bank of England that the base rate is now 4%, and set to rise further in March, we'll be taking a look at how this could affect the property market and landlords too.
Further rises expected
With this most recent rise, many outlets are now predicting the base rate will reach over 5% before the end of the year, with a further 0.25% increase expected in March. It remains to be seen if the base rate will reach over 4% before the end of Q1, however.
Tumbling property prices
Zoopla predicted at the end of last year that a mortgage rate rise to 5.8% would see property prices fall up to 20% this year, which would wipe out what it called 'paper gains' over the period since the first Covid lockdown in 2020.
Zoopla also predicted that if the rates stayed around 4%, we may only see a small correction of 5%. Mortgage rates are staying between 4-5% for the time being, and are expected to remain in this range for the time being, even with further interest rate rises. This is due to mortgage lenders factoring in the cost of borrowing today, and loaning money over a longer period of time than just a few years.
Landlords looking to expand their portfolio
If property prices were to fall further, and mortgage rates were to increase, it would represent a massive opportunity for those investors looking to grow their portfolio this year, as buyer demand would shrink further so there would be less competition from those buyers who will be owner-occupiers and don't need to find the best deal.
Although in the short term, it may mean your investment isn't as profitable as it could be, the capital gains & rental income over time would certainly catch up as is often the case as the market, and mortgage rates, fluctuate in response to the ever-changing economy.
Are you looking to expand your portfolio this year? We have local rental market experts in the top rental markets across the UK, including London, Leeds, Liverpool, Birmingham, Manchester, and Edinburgh. Book a call below and see how they could advise you on your next investment.