Interest rate – little effect on commercial property investing

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If the Bank of England raises the interest rate in May 2018, this should not significantly affect the commercial property market.

There has been wide speculation that The Bank of England will raise interest rates by a small percentage in May 2018. The governor of the bank, Mark Carney has said that there will be rate increases over the next few years, but he would not confirm whether the next increase would be in May.

When interest rates rise, what effect will this have on the commercial and buy to let property markets? Lending stress tests are based on the borrower being able to afford commercial mortgage repayments if the interest rate rise. This means that most borrowers who presently qualify for a commercial mortgage should still be able to obtain a loan after interest rates rise.

After any Bank of England rate rises, there is pressure for lenders to increases their mortgage interest rates, but because of competition amongst lenders, increases are expected to be minimal.

It is possible that increased interest rates could delay people purchasing their first home, and this means that they will continue to rent. Demand for rented property is not expected to fall. Rents for private residential property should be unaffected by any rate rises. House prices are rising which means that capital growth for landlords should be good.

Changes in interest rates will not alter the fundamental benefits of investing in commercial and buy to let property.

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