BoE base rate rise – property experts respond

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News that the Bank of England has pushed up the base interest rate by 50 basis points to a 14-year high of 3.5% has left many property experts wondering whether property buyers will get more help and whether another rise will be forthcoming.

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REACTION: BoE interest rate rises 0.5%, but will it drive up mortgage costs?

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The Bank of England has raised interest rates by 0.5%, taking the base rate to 3.5% and heralding a rise in many landlords’ buy-to-let mortgage repayments.

Following the latest meeting of its Monetary Policy Committee lead by Governor Andrew Bailey (pictured), members voted for the ninth consecutive rise since December 2021, putting the rate at its highest level for 14 years.

Landlords and homeowners now face the likelihood of more expensive monthly repayments; about 1.6 million people on tracker and variable rate deals will see an immediate increase in their monthly payments. Those on a typical tracker mortgage will pay about £49 more a month while those on standard variable rate mortgages face a £31 increase.

Those three-quarters of mortgage customers on a fixed-rate mortgage – including canny landlords who’ve been releasing maximum equity from their portfolios when rates were low before fixing – won’t see monthly payments changing immediately, but house buyers or anyone wanting to re-mortgage will have to pay a lot more now than if they had taken out the same mortgage a year ago.

The committee warns that more rate rises are on the cards to further bring down inflation, with analysts suggesting that they could reach 4.5% by the summer.

Financial expert: Adrian Anderson, Anderson Harris

“Although there is certainly no Christmas cheer from the Bank of England this year for borrowers, the fact that the size of the hike is down 0.25% on the previous increase, coupled with lower inflation figures released yesterday, means that we may be seeing the start of the end of the rate hike cycle with the market now pricing a terminal rate (top rate) for base at 4.5%, down from previous Armageddon predictions of 6-6.5% post mini-budget.”

The portal: Tim Bannister, Rightmove

“It’s important to remember that this rise was largely expected by the markets and so will already have been factored into many mortgage lenders’ fixed rates.

“So the good news is we don’t expect this rise in the base rate to translate directly into increases in current fixed mortgage interest rates.”

The conveyancer: Simon McCulloch, Smoove

“The Bank of England is walking on a very fine tightrope while trying to curb inflation. Today’s interest rate increase will put even more constraints on the financial situations of both buyers and sellers in the property market, especially those on tracker mortgages or coming to the end of their fixed-rate term soon.”

The agent: Lawrence Bowles, Savills

“On the assumption that interest rates peak then gradually ease back a predicted peak of 4% from the middle of 2024, Savills is forecasting that values will begin to recover and that the average UK house price will rise by a net figure of +6% in nominal terms over the next five years.

“This means that by the end of the forecast period (2027), the average UK house price is expected to be at £381,578, a £22,290 gain over five years. This will put prices a significant £92,000 above the pre-pandemic level, following two and a half years of considerable growth (+24% to the end of September).”

View Full Article: REACTION: BoE interest rate rises 0.5%, but will it drive up mortgage costs?

Bank of England mirror the Fed with 0.5% Base Rate rise

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The Bank of England’s Monetary Policy Committee (MPC) today voted by 6 – 3 members to mirror the Fed by increasing the Base Rate by 0.5% to a total 3.5% interest rate. Two MPC members voted to keep the Base Rate at 3% and one member voted to increase it by 0.75%.

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Landlord writes to Gove as bankruptcy looms over ‘arbitrary’ cladding rules

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A landlord who’s facing bankruptcy has written to Housing Secretary Michael Gove voicing his frustration that he is not eligible for any cladding funding despite only earning £63 a week from his properties.

The landlord, who has BTL interest-only mortgages, has two freehold semi-detached houses and three leasehold apartments, two of which are over 18 metres in height and need cladding remediation. However, because he owns more than three properties, he’s not covered by any Building Fund financial package.

“Over the last 11 years my real profits from all five BTL properties, after expenses, including insurance, management fees, new boilers, new roof and new windows amounts to an average profit of £276 per calendar month, or £63 per week,” he explains.

“My BTL mortgage payments have doubled since December last year and I am now in the red every month and making up the shortfalls from savings.”

He believes it’s unfair that someone with three £1 million apartments is covered and deemed a ‘victim’ of historic failings, yet he is on the cusp of bankruptcy.

Sink or swim

He tells Gove in a letter also sent to the Leasehold Knowledge Partnership: “Whether I sink, swim or just tread water is something I accept.

“My investments have not worked out and I have to deal with the consequences. But what I absolutely do not accept is being made liable for cladding works where an arbitrary cut off point has been made that bears no relation whatsoever to income reality.”

The landlord has had the same tenants in his freehold houses for the last 11 years but might have to sell them to subsidise the other three leasehold properties – and that’s without even considering the cladding costs. Those tenants will be evicted, he adds.

“Another consequence of punishing small scale landlords for the large-scale historic scandal created by government, its agencies and big business.”

View Full Article: Landlord writes to Gove as bankruptcy looms over ‘arbitrary’ cladding rules

Claiming deposit?

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Hello, a tenant has disappeared after a possession order was granted owing thousands in rent. I have requested the deposit at DPS to be paid to me.

I have no contact number or forwarding address for the tenant.

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Renters see biggest annual rent rise since 2016

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Tenants have seen rents rise yet again with the Office for National Statistics (ONS) reporting that rent prices grew by 4% in the year to November.

The latest Private Housing Rental Prices index highlights that rents were slightly higher in last month than October’s 3.8%.

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‘Dear Mr Gove, stop hammering the PRS’ say leading figures in open letter

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We, the undersigned, are business leaders within the Private Rented Sector across the UK. 

With inflation hitting levels not seen since October 1981, we believe that current government policy in the rental sector — covering 35% of UK homes — is stoking housing inflation, the largest single component of the cost of living. 

As set out in the recent Renters’ Reform Bill White Paper, current policy objectives include improving housing quality and giving tenants greater peace of mind about being evicted.

These are worthy objectives which we, and most tenants, support. But tenants – whether professionals or students – also want their housing to be affordable, and current policy appears to ignore this point.

A recent survey of tenants confirms that rising levels of rent are tenants’ biggest single concern, cited by 86% of respondents.

By contrast, the condition of rented properties, a priority of the Renters’ Reform Bill, while also a significant concern, is cited by fewer than half as many tenants: 42%. 

Government policies to restrict landlords’ legal rights, raise minimum energy efficiency standards to an EPC band C, extend mandatory local licensing, raise taxes on property income and transactions, enhance compliance obligations for HMOs, and increase maintenance costs are putting undue pressure on landlords — most of whom have only one or two rental properties.

Already, we see net negative repercussions on rental supply, with many landlords leaving the sector; property portal data shows that supply is down 46% compared with the five-year average. 

At the same time, tenant demand is at an all-time high, with portal traffic up 142%. Many surviving landlords are understandably looking to cover their increased costs via higher rents.

Landlords who agree with this letter's points can sign the open letter here.

Goodlord’s Rental Index saw rents on new tenancies in September hit £1,249 PCM, up 13% on the same period in 2021. Rent increases restrict mobility and supply, with tenants frightened to move house for fear of facing even higher rents in a new home. 

By failing to encourage adequate supply, government policy is directly contributing to the sharp increases in rental prices. 

Freezing rents in response, as recently introduced in Scotland and proposed by London’s Mayor, would further damage the sector, restricting supply to a greater extent and fuelling landlords’ withdrawal from the sector.

We urge the government instead to consider ways to improve supply – while continuing its aspirations to ensure quality homes for tenants – by ensuring the rental sector remains an attractive place to invest without relying on skyrocketing — and ultimately inflationary — rents.

Signed (to date) by:

Ben Beadle, NRLA
Theresa Wallace, Savills
William Reeve, Goodlord
Peter Knight, Property Academy
Gary Wright, Flatfair
Heidi Shackell, The Lettings Hub
Ben Grech – Reposit
Chris Hutchinson – Canopy
Kristjan Byfield – The Depositary
Eric Walker –  Martin & Co

View Full Article: ‘Dear Mr Gove, stop hammering the PRS’ say leading figures in open letter

It’s not the tenant that’s the problem!

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Is there anything you can do when it’s the neighbours who are being antisocial and affecting YOUR tenants?

I HAD lovely tenants with 2 autistic children living in a property. All was well, until the lovely old man next door died

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NEW: Minister reveals more detail on looming holiday lets registration scheme

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The government has announced its new registration scheme for short lets will launch next autumn, scotching opposition MPs’ repeated calls for a licensing scheme.

During the latest Commons debate about a new clause to the Levelling Up and Regeneration Bill, Housing Minister Lucy Frazer (main picture) promised to consult on the issue of making short-term lets a separate category of planning use early in the new year, which would hopefully be followed by legislation.

While Airbnb has long called for a national register for the short-term lets sector, Labour and Lib Dem MPs including Rachel Maskell asked the minister why she wasn’t bringing in a scheme that would enable local authorities to determine areas where they could exclude the expansion of Airbnbs or control licences.

Landlord switching

Conservative Derek Thomas said there should be a way to curtail the opportunity for a landlord to switch a home to a holiday let. “I ask the Minister to consider including second homes in the consultation,” he said.

“With that measure in place, Cornwall Council and other local authorities can assess the housing need and choose to decline a change of use application, protecting the home for permanent residents.”

Frazer said it was important to first establish which areas were causing issues so it could make evidence-based policies, ensuring those communities were not hollowed out.

Work better

“Our amendments focus on making the planning system, and the systems that interact with it, work better, innovating and improving for the benefit of all our constituents.”

Chair of the UK Short Term Accommodation Association, Merilee Karr (pictured), supports a registration scheme which she says must be simple and low cost for hosts to register with and straightforward for authorities to run.

“It must also take into account the benefits that the short-term holiday lets industry brings to local communities and support owners who rent out properties that would otherwise sit empty,” she adds.

View Full Article: NEW: Minister reveals more detail on looming holiday lets registration scheme

NatWest latest big firm to join the BTR funding push via 3,000 home package

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NatWest is the latest big corporation to fund build to rent schemes, following in the footsteps of Legal & General and John Lewis, which have both invested in the popular private renting option.

The bank has put up part of the £285 million funding for global investment group EQT Exeter and Sigma Capital Group’s joint venture housing project to create high-quality apartment blocks and houses in more affordable parts of Greater London and commuter towns.

After agreeing an initial £150 million debt package along with Leumi UK bank earlier this year, the NatWest team brought Allied Irish Bank and Dutch-bank NIBC onboard, which agreed to provide further development finance to build the 3,000 homes. 

Local community

Sigma Capital Group, a residential development and urban regeneration specialist, launched the project two years ago with the aim of delivering buildings with strong sustainability credentials; wherever possible, the homes will tap into local community heating networks and utilise photovoltaic panels, include cycle storage and be located near green outdoor areas.

The homes will operate under Sigma Capital’s Simple Life London brand and will be let at affordable rent specific to each location’s average household income.

Graham Barnet (pictured), CEO at Sigma, says: “We thank NatWest and the other institutions within the lending group for supporting organisations such as ours looking to deliver significant social impact by providing housing to renters in affordable locations as well as offering community services within Greater London and its commuter towns.”

Read more: What does BTR mean for BTL?

View Full Article: NatWest latest big firm to join the BTR funding push via 3,000 home package