Home News Mortgage Rates and Landlords Choices with Rooms To Rent

Mortgage Rates and Landlords Choices with Rooms To Rent

24th January 2024 Rooms For Let

With some lenders reducing mortgage interest rates and bringing in new fixed rate deals towards the end of 2023, does this signal further drops in 2024 and will this affect the thinking of landlords and those thinking of coming in to the rental market in the short to medium term?

Whilst some lenders, in January 2024, having in fact pulled recent offers and increased rates, is the overall trend downwards?

Santander Bank announced on 23 January 2024 that they will increase mortgage rates with increases of between 0.02 and 0.2 percentage points on some packages.

Is it likely that other lenders will follow suit or look to hold fire and see where UK inflation and Bank of England base rates move in the next few weeks?

At the very least this could add some uncertainty to a housing market which was beginning to see some strengthening along with consumer confidence that interest rates were indeed on the way down after 2 years of consistent increases.

There is a school of thought that where banks bring out new deals and offers, when this is oversubscribed and completion dates get longer, the deals are pulled to slow down new business. This may well be the case in this instance rather than increases across the board or major lenders.

Nationwide announced that they will reduce mortgage rates by up to 0.81% so there is little consistency to show which way overall rates will move.

However, the general consensus is that the Bank of England will reduce rates around April 2024 with small drops during the year. This should be followed by further mortgage rates reductions and improved fixed rate deals from lenders.

So, what are the best deals and how does this affect Landlords?

Barclays, Halifax, Santander, TSB, NatWest and Nationwide reduced there mortgage rates in December 2023, with nationwide the first lender to offer a rate of below 5%. This rate was on a 2 year fixed deal with a 40% deposit.

As of today there are a number of sub 5% deals available to first time buyers and those looking to remortgage. For example, Lloyds are offering a 5 year fix at 4.13% with a £999 arrangement fee. The lowest deal currently without an arrangement fee is Yorkshire Building Society with a rate of 4.34%.

However, as rates are changing all the time it is prudent to keep an eye on the market. Review rates on comparison sites such as MoneySuperMarket or speak to a Mortgage Broker to find the best rates available to you.

Buy To Let Mortgage Rates

As a landlord you would be more interested in Buy To Let rates. This could be to purchase a buy to let property, to build or increase a portfolio, or where looking to remortgage to reduce costs.

It is prudent to look for new deals particularly when coming to the end of a current fixed rate. As interest rates have increased substantially over the past 2 years, any landlord or home owner approaching the end of a fixed deal could see significant increases in monthly mortgage payments.

The choice is whether to fix now as rates begin to drop or hold your nerve in the hope that fixed rates will drop further, offering a greater saving over the term of the mortgage.

Another option may be to consider a Tracker mortgage which will track the bank of England base rate. These are likely to be higher rates than fixes but may well drop below a current fixed rates if rates move down.

Always seek advice from a mortgage broker and monitor deals on comparison websites before making a final decision.

How Does Reduced Mortgage Rates Affect Landlords and Tenants?

As mentioned above, any reduction in mortgage rates will reduce the cost to a landlord. This could mean recent rent increases throughout the UK will slow down as landlords cost pressures ease.

It could also mean that renters could consider buying as a monthly mortgage payment may well be lower than renting. Added to reduced interest rates, wage increases are currently outstripping inflation meaning more money in people pockets. Whilst it may not feel like it to many, with the cost-of-living crisis still a hot topic, lower interest rates and higher wages will obviously improve the financial position for a large proportion of people.

With many looking to purchase rather than rent, this could also reduce the pressure on rent prices, helping to slow the increase. It may also mean reductions in rent prices in some areas with less people looking to rent, so increasing the number of properties available. Indeed, it is noted that rent in London have actually fallen over the first two months of 2024.

Are Rent Prices Likely to Fall?

This could be the beginning of falls in rent across the UK for the reasons highlighted above. This could be for whole property rentals as well as spare rooms to rent.

This is obviously a positive for tenants but may not be a negative for landlords as costs reduce with the bottom line remaining largely the same.

That said, with the serious shortage of available homes in the UK it is unlikely that there will be a sharp and sustained reduction in rent prices for the foreseeable future.

Rent a Rooms to Save on Costs

If you are a first-time buyer and concerned by the cost of home ownership, there is an option to reduce that cost and provide additional income by renting a room in your own home.

With the UK Governments Rent a Room Scheme you are able to earn up to £7500 per year in tax free income when renting out one furnished room in your own home. This can provide significant assistance in covering costs such as mortgage and energy and other bills. If you have rooms to rent you can register here to post an advert.

Find Rooms To Rent

You can register as a tenant to send any enquiries and this is completely free. There is a small payment if you wish to speed up the process and receive landlord contact details but you can send and receive enquiries via our messaging system with payment.

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