How to Manage Interest Rate Increases as a Property Investor and Thrive During the Financial Crisis

Being a UK property investor currently feels akin to being a punching bag. Blow after blow, we face the looming threat of the Renters Reform Bill, the ongoing Energy Crisis, and the recent staggering rise in interest rates to 6%.

If you feel more like a punching bag than a landlord, then this blog is for you. While we may not have all the answers, we can offer some guidance on managing the primary challenge confronting property investors today: rising interest rates. In this article, we will give you our insider advice on cutting costs, increasing profitability, and planning for the future.

What to Do if Your Mortgage Interest Rates Increase: Shop Around

Our first piece of advice is this: shop around. Many people have a mortgage with their bank or another high-street lender. Although there is nothing wrong with this, it does present a small problem when your refinance comes around. High street lenders can only provide mortgage products that are on their books, so you’re not necessarily getting the best rates on the market.

It’s like going to a branded car dealership to buy your new car. You’re only going to see their branded products, not every car that’s available to you. If your current lender is quoting you a staggeringly high rise in interest rates, then don’t be afraid to shop around, or speak to a mortgage broker who will do the shopping for you, saving you time and money.

What to Do if Your Mortgage Interest Rates Increase: Evaluate Your Rental Income

It is surprising how many landlords don’t increase their rents annually. Although there isn’t anything wrong with this if you want to keep your tenants happy, it does present a problem when we hit a Financial Crisis, like the one we’re currently facing.

As a landlord, you are legally allowed to increase your rental prices once per year for existing tenants. It might make you feel uncomfortable, but this is vital if you want to keep your properties cash flowing.

The problem with not increasing your rents regularly is that, in an economic situation like this, you might need to increase your prices drastically, which can agitate your tenants. If possible, plan for the future by making small increments each year. You never know what is around the corner.

What to Do if Your Mortgage Interest Rates Increase: Plan for The Future

The past few years have been nothing short of rocky for the UK economy, and none of us could have predicted what has happened. But, with life, and especially with property investment, you have to expect the unexpected. Anything can happen at any time, from a new bill going through parliament, to a recession.

When buying new properties or refinancing existing ones, don’t just think of today. Think about the future, and what it can hold. For example, if you’re buying a new investment property, then stress test your figures. What happens if interest rates rise by a further 3%? What if energy prices increase?

It’s better to be safe than sorry, as the saying goes. If a deal works under pressure, then it will definitely work if the opposite happens, and everything goes well.

Finally, try not to overleverage your purchase. The more equity you have in a property, the lower your interest rates, and the less chance you have of slipping into negative equity. Although high loan-to-value products and ‘no-money-down deals’ are attractive, they can leave you in a sticky situation when interest rates rise. Don’t be afraid to put another 5-10% down on your mortgage if you have the cash liquid; it can protect you in the long run.

Helping You Through These Difficult Times

We don’t just want to help you survive the Financial Crisis: we want you to thrive! This means helping you to cut costs on your existing properties and acquire new ones.

If you have a refinance coming up and you want a second pair of eyes to do some price shopping for you, or if you just want some professional advice on new or existing investments, then contact our helpful team today. Book your free consultation by clicking here.