There is now every chance that rates will be cut in August. But for now mortgage borrowing costs will remain more or less the same, especially those with tracker mortgage deals which will automatically fall in line with the drop in interest rates.
Landlords with fixed rate mortgages would not have benefitted from the cut until their deal expires.
However, even if there is a cut in interest rates next month, it will not necessarily be passed on in full by mortgage providers, as David Whittaker, managing director of Mortgages for Business, pointed out last week.
He said: “They [lenders] may even be keen to sustain current rates, or increase pricing in order to regain recent months’ lost margins.”
Nevertheless, there remains a very strong core of stable low loan to value lending to property investors, including landlords, which is unlikely to contribute to instability, according to Whittaker.
“The current regulatory regime adds to this strength,” he added.
Good move
The MPC’s decision to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer has been welcomed by Private Finance.
Simon Checkley, managing director of Private Finance, said: “We fully support today’s decision by the MPC to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer.
“We anticipate a further review in August once the new economic forecasts are published where we would expect the committee to cut rates by as much as 50bp, achieving a zero percent interest rate, which would be in line with Mark Carney’s most recent comments about the need for the implementation of monetary easing over the summer.”
Dismal savings
Despite the Bank's decision to keep rates on hold, the outlook for savers continues to look bleak, with the average easy access savings account now paying just 0.56% interest.
“The move will make little difference for frustrated savers who are already receiving record low returns for their cash,” said Stuart Law, CEO at Assetz Property.
Law expects to see continued growth in buy-to-let property, largely because investors can get around three times the income that they could get from a bank account and still have good long term security of capital.
He continued: “Buy-to-let landlords investing in Northern property in particular will continue to thrive as the market appears to be remaining stable post-Brexit. Prices continue to be modest versus the South, while gross yields are reaching up to 8.5% on average, compared to just 3.5% in the capital.
“Amid these current times of uncertainty and unanticipated outcomes, we expect investors to concentrate on investing for yields as the small dividends from the stock market do not really compensate for fluctuating share price risks.”
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