Inflation in the United Kingdom caused by COVID, the war in Ukraine and the disastrous mini budget unveiled by former PM Liz Truss have resulted in a drastic increase in mortgage rates that don’t seem to be settling any time soon. A rise in interest rates has seriously complicated the lives of landlords, especially those who pay variable mortgage repayments and other debts.
Landlords with a portfolio of properties to manage might find mortgage rates becoming untenable in the coming months and this could mean they seek to either offload some of their properties or increase rental costs, both of which are business moves no landlord ever wants to take.
Even those who have fixed-rate mortgages to fall back on are not completely out of the woods, as interest rates will likely be significantly higher when that fixed term ends. In essence, all a fixed term is doing is delaying the inevitable. So, what should landlords be doing to strengthen their positions and keep the wolf from the door?
Examine your mortgages
Put all of your mortgages under the microscope and work out when the current terms end and how much you’re likely to be paying when they do. This way, you can start shopping around for deals right now and many banks and building societies will let you lock in a new rate up to six months before the old term ends. This might seem like a bad idea given the current interest rates but they could and probably will always get higher in the early months of 2023.
Consider taking out a loan
Rather than selling off any of your properties (not a good idea given the state of the market right now) to make up for any losses, instead consider taking out a secured loan to help keep the engine ticking over, so to speak.
Look at the benefits
There are, believe it or not, some benefits to high inflation for landlords. For example, people are more likely to delay buying a house themselves right now, which means there is going to be a larger rental market for you to pull from. Also, inflation means average property prices will rise, which means your portfolio will generally be worth more.
Work on your tenant relationships
With the cost-of-living crisis squeezing every penny out of many people’s wallets, many tenants are going to be unable to pay their rent arrears, some that might otherwise have always been incredibly reliable. This means you should work on cementing your relationships with your tenants. You’re more likely to be able to strike a compromise with them if you’re on good terms with them and nobody wants to throw a starving family out of their home.
