So the Bank of England have now held interest rates for five meetings in a row, but don’t get too complacent because at the last meeting, three members voted for an increase from 3.75% to 4%, which shows that they’re actually far more nervous about inflation than the apparent hold suggests.
The next rate meeting is on the 17th of September and after that, the date anyone with a mortgage should have circled is the 28th of October when the Chancellor delivers his first autumn statement stroke budget.
But what does all this mean for buy to let mortgages?
Is this now the time to start locking in and fixing before interest rates start moving?
Well, on the buy to let side, the picture over the last few weeks has been reasonably encouraging.
Barclays, HSBC, NatWest, Virgin Money, Coventry Building Society, Shawbrook, Castle Trust and the Mortgage Works have all trimmed pricing on parts of their buy-to-let range, and Moda Mortgages cut its limited edition five-year fixed range by up to 0.1%, with rates now starting from 5.04% on single dwellings.
Typical two-year fixed rate buy-to-let deals are now sitting around 5.6%,
with five year fixes a touch lower, roughly at 5.5%.
Though the actual number you’ll be offered will depend heavily on loan to value, whether you’re borrowing personally or through a limited company, and how big your portfolio already is.
And of course, let’s be honest, when we’re talking about cuts of 0.1%, none of this is a dramatic move.
But after 18 months of rates mostly going one way, a run of small cuts across eight different lenders is a pretty good thing, I guess.
But here’s what we need to be thinking about.
The autumn statement is a genuine risk event for mortgage pricing, not just for tax.
Government borrowing plans do move gilt yields, and gilt yields move swap rates.
And swap rates are what lenders actually use to price fixed rate mortgages.
So a budget that’s seen as loosening the purse strings could push pricing up again within days of the announcement, maybe even hours.
Now of course, I don’t know which way it’s going to go.
It could be that the Chancellor actually tightens the purse strings, but I wouldn’t necessarily count on that.
The thing is, it’s worth watching and then making a decision.
Now what you can do in the meantime is if you have a fixed rate ending within the next six months, many lenders will let you reserve a new rate now, often three to six months ahead of completion, well before the autumn statement has even happened.
And if pricing improves before you actually complete, most of them will let you switch down to the better deal at no extra cost.
And if pricing gets worse, well, you’re already protected at the rate you reserved.
That’s about as close to a free option as this market ever offers, and it means there’s very little downside to sorting it early and a real possibility of being caught out if you sit and wait for more certainty.
Now of course, if your current deal doesn’t end, say, until the end of next year, none of this is especially urgent.
But it’s still worth putting a date in the diary to start the process three to six months out rather than leaving it to the last few weeks when you’ve got less room to move if the market has shifted against you.
And this is exactly the kind of moment where a good mortgage broker earns their fee.
They’ll know which lenders currently offer free rate reservations and product switches.
They’ll know which ones are quietly repricing week to week ahead of everyone else.
and whether your existing lender’s retention offer is genuinely competitive or just the path of least resistance.
Ringing around 8 different lenders to work it out for yourself isn’t a good use of your time and in any case, most lenders actually want you to go through an intermediary anyway and won’t deal with you direct.
So if you don’t have a good mortgage broker or if you’d like a second opinion, I’ll be very happy to put you in touch with my very good mortgage broker.
Just e-mail me, thepropertyteacher@gmail.com
That’s thepropertyteacher@gmail.com and I’ll happily make the introduction.
By the way, none of this is financial advice.
I’m not a mortgage broker nor am IA financial advisor.
So please do take professional advice from a mortgage broker or from an independent financial advisor before drawing down any loan or mortgage.
Here’s to Successful Propetry Investing
Peter Jones
Author, property investor and Ex-Chartered Surveyor
PS
By the way, if you’d like a deeper dive into property investing based on the real-life experience of an investor who has built a substantial multi-property portfolio, my popular e-book, The Successful Property Investor’s Strategy Workshop, explains how I built my own portfolio from scratch and the principles that can help you do the same.
thepropertyteacher.co.uk/the-successful-property-investors-strategy-workshop
