Kentish Gazette Canterbury & District
Landlords could raise rents after interest rate hike
Renters in the district could face higher bills as a knock-on effect of the recent interest rate hike.
According to letting agents in Canterbury, larger rental fees could start to trickle through from next year as landlords try to fill the gap in their finances left by the rise.
Last week, the Bank of England announced the interest rate will increase from 0.25% to 0.5% – the first increase in a decade.
For households on a variable rate mortgage, which moves up and down based on the rate, it will mean higher payments.
In Canterbury, where there is a huge rental market, buy-to-let landlords on a variable mortgage may be left out of pocket, with the rent from tenants no longer covering the mortgage each month.
Kevin Hall, director of Martin & Co in Watling Street, says letting agents may face pressure from landlords asking them to increase the rent.
“Ultimately they can only let the properties for what the market will bear and what people will pay,” he said.
“That might force out some landlords and therefore reduce supply of rental properties. Reduced supply creates an upward pressure on rental costs due to demand.”
Mr Hall says landlords who paid cash for properties will be unaffected, but those who have borrowed heavily will be looking at how to cover the costs.
“It won’t happen overnight. It might come when they have to renew their mortgage,” he said.
“Right at the moment we are advertising our student lets for 2018/19. That’s where the pressure will be.”
Mr Hall points out, however, that property will still remain one of the most popular invest- ments, generating returns of around 5% in Canterbury
“Although capital growth can never be assured, anyone looking for a long-term return would struggle to find the same level of growth from any other investment,” he added.
Buy-to-let specialist Donna Mccreadie, of Perrys Chartered Accountants, agrees the interest rate rise will hit landlords.
“It is a possibility that if a landlord’s current mortgage rate is on a variable deal, this will eventually trickle down to the tenants and affect rent levels,” she said.
But Simon Hughes, managing director of Letcanterbury.com, insists most landlords will have already thought ahead.
“They are usually on a fixed rate mortgage over five years so if the interest rate changes it doesn’t really affect them too much,” he said.
“Landlords will have thought about the future so this rise is unlikely to have an impact.
“What will affect them is if the proposed tenancy fee bans come in, that’s the more important one.”
In April, the government announced new measures banning unfair letting agent fees, meaning tenants need only pay the rent and a deposit.