Is Now the Right Time to Invest?

Mortgage Rates

As inflation rises in the UK, the Bank of England’s base interest rate has hit 4.25%. This means buyers on a tracker mortgage could be paying as much as 5.75% interest on their mortgage. Therefore, this has been enough to drive reluctant buyers away from the market. However, private lenders are still offering competitive rates for buy-to-let investors as it is often seen as more risk-averse for lenders. This is because buy-to-let mortgages require a 25% deposit, and the investor is likely to be recuperating costs by renting out the property.

If an investor is using a tracker rate, they can remortgage at a lower rate once inflation reduces. According to Bloomberg, UK inflation will drop to just above 2% by the end of 2023. Once this happens, the Bank of England inflation rate should follow shortly. When the interest rates have reduced, many properties will start to sell above market value once again, as reluctant investors begin to build their portfolios.

Location

Investors should currently be looking for the top investment hotspots in the UK. In some areas, property prices are lower and therefore investors can sustain a profit while paying higher interest rates. However, in areas like London where property prices are incredibly high already, the investor can struggle to maintain a profit while charging competitive rents. Therefore, an investor would have to charge higher rental prices, which would make it very difficult to obtain tenants.

In areas such as Manchester, Liverpool and Leeds, property prices are around half the price, but the rental markets are in high demand. This means the rental property is incredibly high yielding. This allows investors to have some room to adjust prices according to demand and gives them higher returns, meaning if repayments are temporarily higher, the landlord can still make a profit.