Interest rates set to rise? – How will that affect the Aylesbury property market?

A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 11,918 homeowners in Aylesbury, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 4,291 rental properties in the town, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will be early in the New Year around Easter time, when they do rise. The Americans have just held their rates despite it being widely forecast that they would put an increase in place. I also expect any rises will be slow, steady and limited. It depends on what happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much as most of us in Aylesbury would love to pull the shutters down and ignore the rest of the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Nala has no intention of worrying about interest rates any time soon.

Those Aylesbury landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here!  Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage broker, there are lots of them in Aylesbury, and seriously consider fixing your mortgage rate now.  You didn’t buy your Aylesbury buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Aylesbury buy to let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Aylesbury landlords have seen their return on investment for their Aylesbury buy to let property, over the last couple of years, perform very well indeed with Aylesbury property values rising by 36.58% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Aylesbury!

Finally though, can I ask that all Aylesbury homeowners and landlords, who have a mortgage that isn’t fixed seriously consider securing a fixed rate now. Recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage broker and, if appropriate, fix your mortgage before interest rates rise.

If you are planning on investing in the Aylesbury property market, or just want to know what to consider for a successful buy to let investment email any questions to me ian@mortimersaylesbury.co.uk or pop in to our office when you are next in town.