How an interest rate rise in the coming month could impact your mortgage?
With speculation the bank of England has announced it is keeping the property rates as it is although a rise could happen before Christmas.
Interest rates are at a very historic low since the start of the pandemic but the bank has indicated that modest rises are expected in the coming months. The next decision is due to take place on the 16th December.
What is the bank of England base rate?
The bank of England base rate is the bench mark for the cost of borrowing. It is important to homeowners and buy to let landlords because mortgage lenders base their rates on what they can charge on it.
Why is rising inflation an issue?
A lot of news regarding energy bills increasing which also means that the weekly shop is increasing. The rate of inflation affects everything we need to pay for. Grocery prices are estimated to have already increased over the past month or so. Manufacturers are passing on the cost of rising labour, materials, energy and transport.
The bank of England have a target of halving the inflation to 2%. One way they can achieve this is by increasing rates.
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How will increasing rates affect my mortgage?
Any increase in rates could have an affect on any bodies monthly mortgage payments unless you have a fixed rate. Most people tie their fix rates for 2 years or more. If you are a fixed rate it shouldn’t be a problem.
However, 20% of borrows have a variable rate or a tracker mortgage and your fixed deal may be coming to an end.
The interest rate paid on tracker mortgage is usually the bank of England base rate plus a set percentage. For example, the current base rate is 0.1% plus 1% would mean you pay 1.1% right now.
Has all the speculation about interest rate increases started to impact on the mortgages already?
We understand that most high street lenders have already begun increasing their interest rates in anticipation of a rate rise before or after Christmas.
It is important that you keep an eye on the market.
What can I do about it?
If you are on a tracker or a variable mortgage you can shop around to see if you can find a cheaper fixed mortgage option or you may have to pay an early redemption. You should speak to your advisors.
Nationwide house price index reveals.
The price of a typical home in the United Kingdom has exceeded £250,000 for the first time according to the nationwide. The average price property in October was £250,311 making a 9.9 annual increase. This was a 0.7 month on month uplift. However, there was a word of caution when the Nationwide stated the pushing up mortgage rate could dent the property market.
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Shop figures show over 100,000 homes let illegally
It was reported recently that over 100,000 private rental homes across the UK are being let illegally because they already fail to meet the EPC requirements.
A recent technically firm claims that over 106,337 private rented properties are currently under the minimum standard.
The Government recently gave funding to 59 councils to improve standards. However, 281 other councils collectively account for 78% of the non-compliant properties.
We understand it is a new Government initiative to find people who do not adhere to the minimum requirements.
London property rents predicted to increase by 5.5% in 2022
It was reported recently that there is a strong growth since the pandemic. Rents across London fell by 3.4% between 2019-2020. However, since the beginning of 2021 they have increased by 9.4% meaning they are now 5.7% higher than the beginning of the pandemic.
The lettings industry overall has seen a sharp decline in available properties. The growth is expected to continue, as the volume of properties coming on the market is substantially less. Some landlords are now securing rental let prices of 10-20% higher than they to the pre-covid out break.
A further revival is now coming in from the form of foreign tenants starting to return to the market.
Captain gains tax payment period doubles
Landlords now have twice as long to pay capital gains tax, with the window being doubled from 36 days in this weeks Autumn budget. This applies to UK and non UK residents who sell their property, and the changes come in immediately.
The Government state that “this will ensure that tax payers have sufficient time to report and pay CGT, as recommended by the office of tax implication”.
The rental market has become extremely difficult for tenants and very busy for landlords. There was recent confirmation that in 2019 there were 120,000 properties on the rental market throughout the United Kingdom. In 2022 this is reduced to 50,000. It is a great time for landlords to be able to rent their properties as many letting agents are reporting multiple people wishing to take properties and rents are going up dramatically.
The evidence shows that the rental increase this year across the United Kingdom could be up as much as 10%. Slightly less in London. There are hot spots throughout the country, for instance as recently seen an increase of 32% in rents.
There is no evidence that this rental increase will slow up. Whilst we are coming out of a period of less restrictions there is no flood of properties coming on the market. The sales market also very buoyant.
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We are forever looking to have new products and these will be introduced shortly. Our new products include household, museums, art and collectables. We are very excited to potentially have a new rent guarantee insurance which we are currently working on with one of our insurance companies.
Why not contact us on 01273 827090 or email@example.com to let us know what you would like us to insure for you.
Underinsurance – It could be a real problem.
In the words of the financial conduct authority “there is already an alarming degree of underinsurance”. With both the UK businesses and consumers creating issues throughout each of the property sectors.
It is the responsibility of landlords to ensure they take out sufficient levels for cover for the insured risk of having insurance.
If they fail to take out sufficient level of cover this can have devastating consequences for you. It can result in significant reductions to any insurance pay outs and potentially in the worst case scenario, it may void the policy. Resulting in no pay out at all.
A practical example is as follows;
If the rebuild cost of your premises is £200,000 but the property is only insured for £100,000. You are underinsured by 50%. Every insurance company will have an average clause in the policy which is standard and therefore it reduces the sum insured by leaving the policy holder with 50% of an insurance pay out of just £50,000.
We understand from iInsure that they recently had one of their clients check their rebuild costs. iInsure have an ability to be able to check a policy for the correct sum insured for only £160.00. Substantially more than what most surveyors charge.
The client was insured for £630,000. Once the report was carried out it stated that it should have been £856,000. There was an underinsurance of £226,000 which would have been taken off any claim.
They can provide you with a RICKS certified up to date revaluation. Ensuring that your property is correctly insured for the right amount. The cost is minimal compared to what the situation would be if you weren’t paid out to the correct amount.