May you live in interesting times…..

interest-rateIn February 2009 Gordon Brown was Prime Minister, Alistair Darling was Chancellor of the Exchequer and Mervyn King was Governor of the Bank of England.

Perhaps more significantly, the Bank of England Base Rate was 1 per cent. The following month it was to drop to 0.5 per cent a historic low at which it has stayed for more than 5 years.

In that time the private-rented sector has grown from around 14 per cent of households to more than 1 in 5, thanks in part to billions of pounds worth of buy-to-let lending.

Many landlords have become accustomed to low interest rates, in fact a significant number have never known base rates above 0.5 per cent, and it looks like rises predicted for late 2015 may come as an unwelcome surprise for some.

The calculator below will give an indication of what mortgage interest payment may look like – assuming lenders pass on future increases in full. Simply input your outstanding mortgage amount and current product rate (replacing the green examples) for an indication of the costs of rising rates.

[office src=”’Calculator%202′!Print_Area” width=”537″ height=”510″]

Given the Government’s plans to drastically reduce the ability of landlords to deduct mortgage interest from their taxable income, landlords’ ability to cope with increased rates is likely to be a defining feature of the next few years. Although most predictions suggest that the base rate will increase very slowly – not reaching 3 per cent until around 2017/18.

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