Date Published 25 January 2016
Today, whilst I was drinking my morning coffee and flicking through the newspaper, once again I came across an article discussing potentially imminent, rising interest rates; perhaps since last august, I have periodically encountered various reports of - if and when this will occur. For the past 6 years or so, British interest rates have been hovering at historic lows (0.5%) and as it feels like this has been the norm for such a long period of time, it becomes easy to forget that what goes down, often must eventually rise up once more. Thus, whether it is mid-April 2016 like some articles are reporting, or maybe closer to the 2017 mark as contrasting articles outline, it is very possible that although rising interest rates could occur after both these predictions suggest, it could also very possibly happen much sooner as well - so we must be prepared!
On the surface, rising interest rates predominantly affect those needing mortgages to purchase property or homeowners who currently own their homes with a mortgage. If you can be placed in either of these categories, then you definitely need to consider your financial situation and analyze whether you may need to start budgeting for these prospective interest rate rises. But if you're a Marylebone landlord, who owns a rental property or a series of them, whilst your direct exposure to interest rates is perhaps lower, it is certainly still something you should remain aware of, keeping a watchful eye.
Although I expect these predicted interest rate rises to be stable, within a limited, steady level and unhurried, it does greatly depend on the circumstances revolving around the general state of the British economy, including: UK inflation as well as wage rises. So, even though Britain does pride itself on the saying, 'Keep calm and carry on', it certainly doesn't hurt to prepare oneself as rates are only going up and perhaps it may be time to consider a fixed mortgage rate when purchasing a property or amending your adjustable mortgage rate status. I say this because, fixed-rate mortgages charge an initial rate of interest, which doesn't change throughout the duration of the loan and if you get in there quick, you could potentially save yourself some cash, before interest rates do rise and with them - fixed-rate mortgages. In addition, with an adjustable-rate mortgage, the interest rate varies over time, where even though the initial rate is set often below the market rate of a similar fixed-rate loan, the rate rises over time and if the mortgage is held onto long enough, the interest rate will surpass the going rate for fixed-rate loans. If you currently have an adjustable-rate mortgage (an A.R.M), rising interest rates could seriously increase the interest rate of your mortgage and could surpass the current rate that fixed-rate mortgages are now going for, much sooner than you may have already planned for. In my opinion, whether this will come to pass or not, fixed-rate mortgages, if nothing else, certainly do provide more security and allow for a much more peaceful planning for the future. Although we all know that changing stuff around can be such a hassle and it is easy to say I'll do it tomorrow, or next week, or next month, but please remember that history often repeats itself and mortgage lenders have always removed appealing low rate mortgage prices, with plenty of time before interest rates do rise; so the sooner you intervene upon your current situation, the more money you could potentially be saving yourself. Undoubtedly you want your Marylebone property investment to maximize your income and it's all about mitigating your costs. So preparing well in advance now will save your potentially, amazing investment in hot-spot Marylebone, from becoming one which could become a heavy weight, not only on your shoulders, but also on your wallet. So speaking to those Marylebone landlords who do have a mortgage on their properties, please realize (if you are still debating) that fundamentally as interest rates rise, so do your monthly mortgage costs!
Now for those of you who don't have mortgages on your Marylebone properties, an increase in interest rates could still suppress demand and result in a sluggish and slow house price growth. This could potentially slow down the capital growth of your property, making the investment potential of your properties lower and less financially rewarding. In addition, if you are looking to sell in the near future, if demand as a result of rising interest rates decreases, so could your chances of selling and more specifically selling at your desired price - you may well have to lower your asking prices to tempt prospective buyers and investors, especially those who rely on mortgages. However, as everything comes with both positives as well as negatives, I can tell you that many landlords or potential landlords who invest in Marylebone properties do so without the use of a mortgage, so at least for the mortgage side, these people won't feel the crunch as much. Furthermore, for the others, who may be more affected by these rising interest rates, if we think long term, these rises may actually pacify and slightly domesticate the wild Marylebone property price growth, which we have come to expect. As a result, the Marylebone property market could become more competitive, where perhaps this could lead to an increase in bargain property prices, better deals and in overall more financially accessible properties.
Lastly, if you need any more information about these prospective interest rate rises or would like some advice regarding your personal situation in light of this article, we will be always happy to be of assistance, so don't hesitate from contacting us!