Landlords about to remortgage are being urged to secure a new rate as early as possible - even six months in advance.
Gavin Richardson, the managing director of Mortgages for Business, says: “I think inflation will fall as low as five per cent in the final quarter of this year. But the Bank of England is still going to increase the Base Rate in September — probably by a further 0.25 per cent.
“So if you’re approaching remortgage, while I expect inflation to ease, I recommend securing a new rate as early as possible.
“For some lenders, this can be up to six months before the end of your Early Repayment Charge period. If mortgage interest rates decrease, many lenders allow you to switch to a more competitive product should one become available before you complete.
“If you are on a tracker or variable mortgage that follows the Base Rate, you have time to secure a fixed-rate deal before the next [Bank of England] meeting.
“If you wait, you will see your mortgage repayments increase once again following the Base Rate rise. It’s worth exploring your fixed-rate options with a broker to see how much you could save on your monthly payments.”
Last week the government announced the Consumer Price Index inflation rate was 6.8 per cent in July, down from 7.9 per cent in June.
Inflation peaked last October, around the time of the failed Truss-Kwarteng mini-budget, at 11.1 per cent.
The Bank of England next meets on September 21 to discuss base rate.
Richardson concludes: “As long as inflation continues the same downward trajectory though, we forecast the next rise will be the final increase this year.”
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Base rate will be going up 🆘🆘
I am selling houses & using the proceeds to pay down mortgages on the ones I still have. Fewer properties but no longer beholden to the mortgage companies & then giving money away out of income to avoid IHT!
You read my mind !
If only it was that simple.
I had a credible plan earlier this year to get most of my end of fix properties onto about 4.49% rates this year and it was well and truly stuffed up by TransUnion and TMW.
Although we have totally perfect credit reports from all credit reference agencies and well under 50% LTV borrowing across the portfolio TMW refused a remortgage on a property because my husband's unsecured credit card utilisation was showing as 51%. This was because TransUnion was months out of date and had double counted a balance transfer.
So the plan involved 6 properties, one tracker, 2 fixes ending in April, 2 fixes ending in September and one in November.
Property one was a very small mortgage with TMW so we cleared it to bring us down to 10 BTL mortgages which theoretically gives access to more lenders.
Property two we product switched with TMW with the intention of getting a further advance to help reduce one of the September or November properties.
Property three was the tracker and not easy to place with lenders (ex Council, flat roof, 3 separate tenancy agreements). It fitted TMWs criteria but then they turned it down due to the credit utilisation. So instead of the 4.44% fix we were hoping for it's still on it's tracker at 0.95% over base. Plus we couldn't release a load of equity to reduce some of the following mortgages. Plus the broker told us that as TMW had turned that one down they also wouldn't do the further advance on the property we had just done the product switch on. So that's over £200K of equity we had hoped to access at about 4.5% that we can't use or would be at a much higher rate now.
Property four is being remortgaged away from TMW in September and we are releasing £100K of equity from that one at 4.24%.
Property five is a licensed HMO (so higher interest rate). We had hoped to reduce the balance using some of the equity we were trying to release but have had to fix at 5.6% on a straight product switch with Leeds.
Property six is another licensed HMO. This time with Paragon. Product switch options are between 6.39% and 6.95% depending on product fee. I will have a lump sum from property four but that means I can't sign up for a new rate until I physically have that money in October as Paragon only allow a 48 hour window to make capital repayments without penalty.
Overall it's going to cost around £8000 a year more than we had hoped purely because TransUnion don't update credit files in a timely fashion and lenders rely on the incorrect information contained in them too heavily.
We had done everything right. Perfect payment history, borrowed responsibly, made good use of Section 75 cover, 0% balance transfers, etc. All very prudent. Martin Lewis would be proud of us. Shame TMW were quite so intransigent, especially as we have been customers of theirs for many, many years and have an impeccable history with them.
The broker we were using ceased trading a few weeks ago. They were one of the more mainstream ones owned by Paragon Bank.
Jo
Some excellent examples of computer says NO and incompetent risk averse decision making in TMW.
I had a similar situation just after the 2008 crash when Lloyds TSB took over HBOS. I had a BTL property worth about £280k with a £130k Lloyds TSB BTL mortgage, but also had a £100k business overdraft with HBOS which was reasonably stable but not really reducing over time.
Lloyds panicked once they saw the HBOS overdraft and called it in, telling me they wanted me to sell the BTL property as they would not give me any further low interest deal on it.
I had to sell it for £248k, about 15% below its real value, despite never having missed any mortgage payments or gone over my business overdraft limit.
Lost profits and capital gains lost on no longer having that property probably amount to around £300,000 over the last 14 years or so.
I have zero respect for bank management these days and class them barely above public sector managers.
This sounds more like scaremongering to get business than good advice to Landlord's.
Sell and pay down debt is the best possible advice currently.
I had a bet with myself when I saw the headline and opened the article it was from a mortgage broker. Its crap advice for several reasons. Rates will be coming down soon, this is towards the tail end of opportunity for lenders to keep taking the p*ss, as most of them are with 9.5% svrs and arrangement fees of £2-3k. That said, most lenders are stress testing at stupid numbers, plus 5%, meaning unless your LTV is much lower than 50%, most remos are being refused and current lenders are doing all they can to snare LLs onto horrible 6% fixed deals that Gavin is also recommending that which will soon become out of date. If you can afford it, I would say better to ride it out on the SVR until the Spring. As soon as the tide turns on the direction of travel on rates, lenders will start a turf war not only trying to grab some market share, but retain their own. Irrespective of the base rate, there will be some far more attractive deals out there than there are now.
I see the situation similar to yourself. That said, I'd be the first to admit that I din't think base rate would go this high!!
No I didnt either Andy, but there have been lots of unpredicatble stuff like greedflation at play, energy firms tripling their profits on the Russian gas bandwagon (still) last month it was hotels and airlines that stopped inflation dropping a lot faster in July, then public sector pay rises doing the same. Everyones who has been able has been ramming their snout in the inflation trough whilst its there, slowing our exit from this phase.
Has to stop soon though and data out tonight suggests these last few rate increases seem to be doing the job especially as people come of their 2 year fixed rates the government induced everyone to take out as the SDLT holiday ended in July 21, lots of mortgage pain reducing discretionary spending to zero, retail and manufacturing are reporting a huge summer fall away. Government borrowing cant maintain these rates for long either, so there will be a hard recession and more swingeing austerity all rolled into a bleak 2024/5 if rates dont start to drop soon, mass job losses, repos etc. I think we would all rather some slightly higher inflation compared to that.
Bank of England has been slow to read the situation also. I know hindsight is the best view but anybody whose had a mortgage or someone with savings knew that the ultra low interest rates were a problem in themselves. There should have been some small increases as far back as 2014 in order to give thoughts on perspective. It was allowed to go on far too long and it will hurt a lot of mortgaged households whether they are owner occupiers or Landlords.
B of E need to work with the economy and not just focus on inflation.
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