Interest rates go up and down, that’s life. In fact, in the last few years, since December 2021, we
have seen huge rate increases from the Bank of England.
We were at 0.1% back in December 2021 and now we’re at 5.25%. So that’s a big increase over the last two years. However, that’s not something that wasn’t unusual back 10, 15 years ago.
They were even higher. So people who have only ever seen the low interest rates are worried and are finding difficulty with what’s going on, but that’s not a reason why you shouldn’t invest.
If you’re about to invest in property and you’re looking at a property you’ve got to look at the current interest rates. Obviously Bank of England has gone up, we know that.
So buy to let mortgage rates have gone up too. However they haven’t gone up quite as drastically as the Bank of England rates have gone up. The Bank of England rate has gone up something like 5% over the last two years.
The Actual the interest rates on a buy to let mortgage hasn’t gone up that much.
It’s gone up maybe, 3% or 4%. So we’re seeing. Buy to let mortgages or investment property mortgages somewhere in the region of 5 to 6% right now. Yes, that’s going to cost you more to pay back any mortgage that you take out on a property. But those are the things you’ve got to
factor in when you’re working out whether to buy the property.
So if you’re going to buy a property, you then do your numbers and your calculations , and you’ll work with the interest payments currently, plus you’d also factor in some kind of future proofing/stress testing.
So let’s say that you think maybe there’s going to be a an element of interest rates still going up in the next few years , maybe 5 years.
So you’ve got to factor that into your calculations. You might say I’m going to actually calculate my numbers on buying this property for something that may get to 7%.
Now that’s the best thing to do because then you’re always going to be able to have that future proof should the interest rates go up a little bit more. It’s still going to generate you the income that you have stress tested it at 7% .
So the answer to the question , should I wait for interest rates to come down?
Interest rates do go up and go down and there are various different types of products out there, which change weekly .
You can get fixed rate variable rates which actually track the interest rates going up and down.
So for example, if you took out a variable rate tracker rate right now, it will track
the interest rates. if they start to come down, you’re going to earn more money or if it goes up, it’s going to earn you less.
Or you can fix your product at a set rate for five years, some products will let you fix for 10 years, This can be useful as you’re actually setting your outgoings for the next five years and you’re knowing exactly what income you will get for the next 5 years etc.
This means it’s giving you a little bit of stability.
So the straight and easy answer is yes, interest rates go up and down.
You’ve just got to apply the interest rates plus some stress testing.
So whatever it is you’re buying ,you know if that investment is going to stay there and it’s going to be future proof for you going forward.