The base rate has increased from 4.25% to 4.5%. The base rate is important because it impacts mortgage interest payments for property owners. A higher base rate means that property owners must pay more to cover interest rate costs.
The impact of base rate increase on mortgage payments:
Fixed-rate mortgages usually have a two or five-year agreement which means that the price remains fixed until the agreement ends. The current average mortgage rates are unlikely to increase significantly. Last year, the average rate for a five-year fix was 3.17% (May 2022), and that has risen to 4.97% this month.
When will the base rate decrease?
The base rate depends on the rate of inflation. If the inflation rate decreases, base rates will also follow the same pattern. However, the base rate will decrease gradually.
How will this affect the supply of buy-to-let properties?
Research has demonstrated that younger investors may be affected by base rate increases more than older investors as they often maximise their borrowing to afford a buy-to-let property. Not only this, but also the impact of section 24 on the profitability of properties will also negatively affect the supply of private rental properties.
The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances.
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