Interest Rate Exposure
Growing Your Portfolio
A property portfolio can provide you with a good combination of capital growth and regular income. However, no investment is without risk. Property investment could have more potential pitfalls than traditional financial investment. This can be countered by a sensible approach and proper planning.
Every landlord should have a 5 year Business Plan even if it is just 2 sides of A4 and a spreadsheet mapping out how they hope to maintain or develop their business. Your plan should include interest rate predictions. As the Bank Base Rate (BBR) has been pegged at 0.5% for over six years, new landlords may be unfamiliar with the impact of rising interest rates but managing the risk in relation to this is important. NLA research tells us that the average mortgage rate paid by landlords is 3.3%. The margin between base rate and mortgage pay rates has been narrowing over the past two years with best buy 65% Loan To Value (LTV) rates just below 2%. So we should expect BTL mortgage rates to rise. It’s a good idea to stress test your portfolio at interest rates of 5% and many lenders will apply such a test when you apply for finance.