Fixed Or Capped Rate Mortgages For Property Investment On The Increase

Although the Bank of England’s Monetary Policy Committee (MPC) decided to keep up with the base rate at 0.5 percent, borrowers are starting to show to fixed or capped rate mortgages as increases edge closer, says Simon Gammon, Head of Knight Frank Finance.

He explained: The decision to keep the base rate on hold at 0.5 percent for that 22nd month running was very much as expected, but the pressure for an increase is beginning to mount.

“Commentators on which the financial institution of England is going to do next are extremely much split in opinion, but with inflation refusing to fall, the majority who were predicting no rate rises in 2011 now expect an increase at some point in the past year.

“The fact that the economic recovery seems to have slowed can make the MPC wary of raising rates too soon, but increasing inflation brings its own serious issues that can’t be ignored.

“Uncertainty by what will happen to interest rates is driving individuals to consider their options, particularly with regards to their mortgages. With fixed rates now beginning to edge up, now is a great time to review your borrowing.”

• Cases involving rent arrears rose by 12 percent and today take into account 80 % of all new instructions directed at eviction specialist Landlord Action.

Cases directly relating to Local Housing Allowance (LHA) tenants increased by 16 percent.

Last year, 60 percent of new instructions originated from lettings agents whereas, this year, the dpi fell to 45 percent, suggesting that landlords are increasingly managing their very own properties.

But Landlord Action founder Paul Shamplina warns that although landlords may go through that they are saving cash, this may have its drawbacks.

He explained: Self-managing landlords often try to scrimp in the hope of saving cash by not referencing potential tenants properly or otherwise making certain they’ve adequate landlord insurance. This can cost them more money in the long-term.

“However, if your landlord does run into trouble, our data shows that there’s been a substantial reduction in time between landlords making an initial enquiry to really giving formal instructions, demonstrating that they are no more ready to sit back and therefore are taking quicker action to recoup outstanding monies.

“We have proof of landlords needing to use their credit card to create mortgage payments due to the failure of their tenant to pay the rent, or needing to arrange for a third party to consider rent payments using their tenant via a credit card, a practice which has been recently bought towards the forefront through the housing charity Shelter, which reported tens of thousands of households purchased credit cards to pay their rent or mortgage.”

Since the government announced the proposed caps to Local Housing Allowances, Landlord Action has received an increasing number of calls from landlords seeking guidance on this sector where requires advice have raised by 35 % – this is particularly prevalent working in london and also the East.

Shamplina continued: “In short term, landlords facing repossession action due to mortgage arrears caused by non-payment of rent by tenants is likely to continue. We expect interest rates to remain low but advise landlords to become cautious, particularly if they’ve high gearing on the property portfolios.

“Rent levels had already commenced to increase in the latter part of 2010 and that we expect this trend continue into 2011, which will give landlords some cheer. However, although this is likely to get more investors into the market, historically low lending levels will place a sizable barrier to entry for many, thus, we expect house prices to become stagnant.”

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