Posts with tag: interest rates

Interest rates increased to 0.75% by Bank of England

Published On: March 18, 2022 at 9:17 am

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Interest rates increased to 0.75% by Bank of England

The Bank of England has announced that interest rates have been increased from 0.5% to 0.75%.

The Bank’s Monetary Policy Committee (MPC) has voted 8-1 to increase Bank Rate by 0.25%, to 0.75%.

Adrian Anderson, Director of property finance specialists Anderson Harris, comments: “As widely predicted the Bank of England have decided to increase the base rate from 0.50% to 0.75%. The base rate is now back at the pre pandemic level we saw in March 2020.

“This is now the third increase from the historic low rate of 0.10 percent in December 2021 with more increases expected during the year due to the high levels of inflation we are experiencing.

“Mortgage payments will increase for around two million households according to UK Finance and its likely mortgage lenders will continue to increase fixed rates which will be a shock to many households at a time when bills are increasing.  We are in a very different place now to where we were only 6 months ago when fixed mortgage rates were the lowest on record. 

“The Bank of England are attempting to calm the rise in the cost of living and do expect inflation to ‘fall back materially’ once prices stop rising however, we should expect rates to continue to rise in the meantime.”

Stability in Buy-to-Let Mortgage Rates could be about to End

Published On: May 13, 2019 at 9:30 am

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"This apparent obsession with interest rates can mask more material problems in the housing market, particularly the scarce availability of property in parts of the UK."

The current stability in buy-to-let mortgage rates could be about to end, according to the latest Mortgage Tracker from Property Master.

The online mortgage broker found that the cost of a fixed rate buy-to-let mortgage varied by as little as £1-£2 per month either up or down in May on the previous month. 

Property Master warns that this stability may be about to change, given a recent Inflation Report from the Bank of England (BoE), which signalled that interest rates would rise quicker than expected, on the back of wage growth, falling unemployment and stronger GDP.

Angus Stewart, the Chief Executive of Property Master, says: “We have been tracking the cost of buy-to-let fixed rate mortgages for almost 18 months now, so have a large database. There have only been two movements in base rate over that period – the last one of which was in August 2018 – so we have seen a lengthy period of stability.

“But the Governor of the BoE signalled clearly last week that we should prepare for this stability to end much quicker than was expected, on the back of positive news around wages, unemployment and stronger GDP.”

He continues: “Stable base rates and increased competition in the lending market has helped to keep rates down in the buy-to-let market, but last week’s news means it really is time for landlords to start re-thinking their finances.” 

The May 2019 Mortgage Tracker shows that the average cost of a five-year fixed rate buy-to-let mortgage on 50% loan-to-value (LTV) was unchanged between April and May. At 65% LTV, a five-year fixed rate deal increased in price by £2 per month on a monthly basis. However, at 75%, the cost was down by £2 per month. 

A similar picture emerged for two-year fixed rate deals, with the cost remaining the same or going down by £1-£2 per month.

Since the start of the year, the cost of most categories of fixed rate buy-to-let mortgages has varied by no more than £7 per month, either up or down. The exceptions were two and five-year fixed rate deals for 50% LTV, which saw annual growth in the monthly cost of £18 and £25 respectively.

Property Master’s Mortgage Tracker follows a range of buy-to-let mortgages for an interest-only loan of £150,000.

Costs of Five-Year Fixed Rate Buy-to-Let Mortgages Fall from 2018

Published On: April 8, 2019 at 10:05 am

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New research has revealed that the costs of certain buy-to-let mortgages have fallen.

After a spike during the months of February and March, it has been noted that some popular five-year fixed rate buy-to-let mortgages have seen a drop in fees. Many of these are now cheaper than they were a year ago in April 2018.

This research, from online mortgage broker Property Master, also shows that product fees for such mortgages have increased, sometimes by as much as £335.

The cost of five-year fixed rate offers for 50% of the value of a property fell by £8 a month between March and April, according to Property Master’s April 2019 Mortgage Tracker. Year-on-year, this type of mortgage was down in cost by £28 a month. 

The tracker also shows that the cost of a five-year fixed rate for 65% of the value of a property fell by £4 each month, and by £18 per month, when compared to year-on-year data from April 2018.

Five-year fixed rates for 75% of the value of a property stayed at £408 March to April, but fell year-on-year by £18 a month.

However, a sharp year-on-year increase in average product fees can be seen for almost all of the available fixed-rate buy-to-let mortgages categories that were tracked.

Fees for a two-year fixed rate for 50% of the value of a property saw major growth, from £714 in April 2018 to £1,599 today – an increase of £885.

On top of this, five-year fixed rates for 50% of the value of a property, which increased by £335 in April 2018 to today, from £1,164 to £1,499. 

Figures for this month’s Mortgage Tracker were calculated on deals available on 1st April, 2019.

Angus Stewart, Property Master’s Chief Executive, commented: “It is good news that the type of deals many landlords favour have fallen back a little in cost after last month’s increase.  Better still the headline rate for many of these offers are actually less than they were a year ago.  

“However, there is something of a catch in the increase in many product fees. Applying for a buy-to-let mortgage can be a complex process and it is important landlords compare the total cost of the mortgage they are offered.”

Tax Relief Cuts for Buy-to-Let Investors Enter Third Year

Published On: April 2, 2019 at 9:25 am

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Buy-to-let landlords should now expect “another tightening of the tax rules”, reports leading accountants and business advisors French Duncan LLP.

Tax changes introduced by the summer 2015 Budget brought about discouragement to those considering investing in the buy-to-let market. Chancellor George Osborne then phased in a four-year revised treatment of tax relief, to ease the issue, which began in April 2017.

Stephen Oates, Tax Director at French Duncan LLP, has said: “April 2019 will see the start of the third year of the phasing process, which will mean that over the next year:

  • Three quarters of any interest paid on BTL borrowing will be eligible for a 20% tax credit; and
  • The balance of interest is deductible from rental income, meaning it is fully tax relievable.”

In order to simplify this information, Oates provided the following example of how this change in tax relief will impact landlords:

“If a higher rate taxpayer in England had rental income of £12,000 and interest on a BTL mortgage of £8,000, the investors’ net position is as follows:

tax relief
(Image source: http://www.frenchduncan.co.uk/blogs-news/buy-to-let-investors-can-expect-another-tightening-of-the-tax-rules-in-april/)

“Potentially, the situation could be worse than the table suggests if, for example, the disappearance of the deduction for interest increases the investor’s gross income to the point that it trips over the £100,000 threshold, at which the personal allowance is phased out.

“Interest relief changes and poor short-term prospects for capital growth could result in sales by BTL investors picking up this year. There is another tax incentive to sell on the horizon, too – from April 2020, capital gains tax on residential property (at 18% and/or 28%) will have to be paid within 30 days of sale, whereas the current rules effectively give a minimum of nearly ten months’ grace.”

Property investors in Scotland will be hit even harder by this taxation. Scottish landlords face a 15% greater reduction in net income than those in England and Wales.

Focus on Interest Rates Diverts Attention from other Issues in Housing Market

Published On: March 21, 2019 at 9:49 am

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"This apparent obsession with interest rates can mask more material problems in the housing market, particularly the scarce availability of property in parts of the UK."

Rob Clifford, Director at Stonebridge and CEO of SDL Mortgage Services, says it’s time to end unhelpful speculation about the impact of marginal interest rate rises in the future. 

“It is a decade since the Bank of England dropped its base rate to a historic low of 0.5% – but, with no change to the current 0.75% expected today, the latest announcement looks set to be another non-event.

“As tempting as it might be to say that homeowners will breathe a sigh of relief, the truth is, they are unlikely to base any future mortgage and housing decisions on interest rates alone. Like almost two-thirds of people who bought a property last year, their decision is more likely to be motivated by life circumstances than the economy or the political rollercoaster.

“What’s more, this apparent obsession with interest rates can mask more material problems in the housing market, particularly the scarce availability of property in parts of the UK, and the challenge some people still face in raising the substantial deposit typically required.

“If rates do happen to rise to 1% – as they are predicted to do later this year or early next – the prophets of doom will be quick to dramatise what impact this could have on household finances.  

“However, an increase of 0.25% on a £150,000 mortgage could equate to just £18 extra in monthly interest payments, which is hardly crippling. Most people will simply cut their cloth accordingly, possibly forgoing their gym membership or meals out if they are feeling the affordability strain.

“The cost increase facing a typical borrower is extremely small when you consider that mortgage lenders typically stress test applicants’ mortgage affordability for interest rates of up to 9%: an almost inconceivable rate in today’s world.

“Finally, we need to remember that competition in the market is continuing to drive mortgage choice and availability, even among those who would traditionally have struggled to get a mortgage. Banks and building societies have reacted to consumer demand for more certainty with fixed rate deals, while buyers today normally have their pick of five or six deals to suit their particular circumstances. On top of the zero deposit mortgages now available from some lenders, Virgin Money has just announced that it will consider applicants with satisfied CCJs [County Court Judgements] and defaults on their credit history – a sign of confidence, even in the current economic climate.”

Ten-Year Anniversary of Bank of England Base Rate Cut

Published On: March 5, 2019 at 10:32 am

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Bank of England

Today (5th March 2019) marks the ten-year anniversary of the Bank of England (BoE) cutting the base rate to 0.5%.

Last month, the Bank held the base rate at 0.75%, after it was raised from 0.5% in August 2018.

During the past ten years, savers have collectively missed out on at least £188 billion – the equivalent of £7,101 per household. 

However, the mortgage market has stayed afloat over this period, with lenders increasing competition to secure business. 

Positively, the climate for first time buyers has improved, with trade body UK Finance finding that the number of buyers getting onto the property ladder hit a 12-year high last year. 

Mortgage borrowers are being advised to lock into these record low interest rates while they last, as the Bank is expected to raise the base rate again this year.

Kevin Roberts, the Director of Legal & General Mortgage Club, comments on the ten-year anniversary: “Ten years ago, the BoE cut the base rate to the then record low level of 0.5%. Yet, despite the upheaval and uncertainty we’ve seen since then, the mortgage market has shown just how resilient it can be when faced with change. Amidst increased regulation, referendums and general elections, there is still so much support for buyers, and the number of mortgages continues to grow. 

“Though base rates have risen since November 2017, we need to remember that we are still living in an era of near all-time low interest rates, where competition from lenders for mortgages is fierce. First time buyers are clearly using this to their advantage, with their numbers at a 12-year high. However, even with political uncertainty still reigning, the low rate environment won’t last forever. Borrowers should use this opportunity to get in touch with a mortgage broker now to discuss their long-term financial plans and lock into one of the great rates out there on the mortgage market.”