The Bank of England increased the base rate from 0.25% to 0.5% on November 2, 2017. This is the first time that the base rate has increased for 10 years.
The rate was reduced from 0.50% to 0,25% in March 2009, so the new rate rise brings interest rates to 2009 levels. One reason that the Bank of England has raised interest rates is to counter inflation which is around 3%.
Landlords applying for new commercial mortgages will pay increased interest, though increases are not expected to be high. Some lenders already increased their rates before the Bank of England raised the interest rate.
A tracker mortgage will automatically increase, and variable rate mortgages are also expected to rise. A fixed rate mortgage will remain at the same interest rate, but landlords will pay the higher rate after the fixed interest rate period ends.
Higher interest rates could put off some people from buying their first home and will stay longer in rented accommodation. There are a number of options available for landlords. They could increase rents to cover the increased mortgage repayments.
Property can be remortgaged for a fixed rate mortgage. This will protect landlords from further interest rate increases in the next year or two. Alternatively, property can be sold, though this may not be the best strategy for most landlords.
A mortgage broker can advise landlords about remortgaging or taking out new commercial mortgages.