Something shifted in the last couple of weeks that I don’t think has had enough attention. For most of the past year the working assumption, mine included, was that the Bank of England would keep edging rates down. As of this week, financial markets are pricing in two rate rises by March next year.
And as if to prove the point, Halifax and Santander both increased their mortgage rates a couple of weeks ago.
That’s a proper change of mind. Bank of England base rate was held at 3.75% on 18 June, but the vote was 7-2, with two members already pushing for 4%. The next BoE meeting is on 30 July and most commentators expect another hold, though nobody’s ruling out a rise there or at the September meeting if services inflation stays where it is. Oil prices firming up on the back of trouble in the Middle East hasn’t helped.
Now here’s the odd part. While the swap market has been getting gloomier, buy-to-let lenders have been getting more competitive. The average fixed BTL rate was 5.42% at the start of July, down over the year. In the last fortnight alone, Fleet has widened its criteria on joint applications involving foreign nationals and now accepts limited company group structures registered anywhere in the UK rather than just England and Wales. YBS Commercial has launched a three-year tracker for multi-unit freehold blocks of seven units or more at 1.24% over base – 4.99% today – up to 75% LTV. Hampshire Trust Bank has brought in a new 65% LTV band on semi-commercial with rates from 6.24%. Shawbrook has cut selected commercial and semi-commercial fixes by up to 0.5%.
So lenders are fighting for business at the same moment that the market is starting to expect rates to go the other way. Those two things can’t both stay true indefinitely, and I’d assume the competitive pricing is the more fragile of the pair.
What this actually means if you’ve got a remortgage coming
You may well have. Pegasus Insight reckons almost four in ten investors with borrowing expect to remortgage in the next twelve months, rising to 56% of those with four or more mortgages. If that’s you, the window to organise it sensibly is now rather than six weeks before the deal expires.
Most offers can be held for three to six months, and you can usually swap to a cheaper product if rates fall before completion. That gives you a free option: lock something in now, and if the market softens you take the better deal, and if it hardens you’re covered. Doing nothing gives you no option at all.
A couple of practical things worth doing
Ask about a product transfer with your existing lender as well as a full remortgage elsewhere. A transfer is usually quicker, often has no valuation and no legal work, and sometimes skips the affordability assessment altogether. It won’t always be the cheapest option, but on a case that’s borderline on ICR it can be the one that actually completes.
And run the numbers on what happens if the market’s right about those two rate rises. If your portfolio only works at 3.75%, you’ve got a problem to solve now rather than in March.
Above all, use a good broker. The differences between lenders at the moment are in the criteria rather than the headline rates, and criteria change weekly. Knowing which lender will take a group company structure, or stress a five-year fix at pay rate, or lend on a multi-unit block, is the sort of thing a decent broker carries around in their head and the rest of us have to go and look up.
By the way, if you don’t have a mortgage broker, or you’d like a second opinion, I’ll be very happy to put you in touch with my very good mortgage broker.
Just email me: thepropertyteacher@gmail.com and I’ll happily make the introduction.
Here’s to successful property investing.
Peter Jones
Author, property investor & ex-Chartered Surveyor
P.S. If you’d like help thinking through your buy-to-let strategy properly, you might find my Successful Property Investor’s Strategy Workshop useful.
You can find out more here: https://thepropertyteacher.co.uk/the-successful-property-investors-strategy-workshop/
