Thursday, October 09, 2008
The surprised base rate cut of 0.5% announced yesterday by the Bank of England is obviously great news for many landlords. Those landlords who are on base rate trackers will be celebrating in November when many of the lower mortgage payments will start to 'kick in'. Our own Hawkeye was predicting a fall in interest rate only last week but he like many analysts was expecting rate reductions to feed through over the next 18 months.
Hold the Champagne!
However, before landlords go over board by cracking open the champagne to herald a new age of cheap money. We would advise them that the good news may be limited. Whilst base rates have come down this may not mean that borrowing and borrowing costs will be getting any easier or cheaper for many landlords. This is because the main factor influencing the costs and the availability of credit for many landlords is long term LIBOR. This remains stubbornly high as banks refuse to lend to each other. Currently it remains at about 1.3% above base rate. In recent years LIBOR was at a level very close to that of the Bank of England base rate.
The other thing that landlords should be aware of when considering their finance options is that many buy-to-let lenders will use the reductions in the base rate to restore lending margins on their buy-to-let products. This means that buy-to-let borrowing costs will fall more slowly than any falls in base rates.
All we can hope as landlords is that the Government who have offered the banks a huge £50billion in new funds don't forgot the landlords and property investors when agreeing the conditions on each individual funding package.
Where do professional landlords go for landlord insurance?
In short Property Hawk welcomes the cut, but we advise landlords to save the champagne for another day!
Landlords look at a ever shrinking buy-to-let mortgage market place.Try our multi buy-to-let mortgage enquiry form to get 4 major brokers to help secure you the best BTL mortgage product in difficult times.