Earlier this month, the Bank of England raised interest rates by 0.5 percentage points to 1.75%. This was its sixth successive interest rate hike and millions of homeowners will see their mortgage costs rise.
As the cost of borrowing increases, a potential adjustment in sales prices could present opportunities for investors less dependent on lending. But what impact will this new interest rate environment have on investors who have mortgages? We turned to leading broker Capricorn Financial for an update.
“Although the cost of borrowing is increasing”, says Conor Murphy, CEO, Capricorn Financial Consultancy, “We are seeing positive lender criteria changes being announced. This is on the back of the Bank of England scrapping their affordability guidelines set in 2014. Nationwide announced that they are increasing income multiples for any borrowers earning in excess of £100,000 per annum from 4.75% to 5.5x. They are also increasing their maximum loan amount at 85% LTV to £1.5m. Furthermore, TSB announced they are reducing their stress tests for residential affordability, reducing the rate they apply to their affordability testing by 0.5%.”
Maximum Loan-to-Value 80% (Residential and Buy-to-Let)
|Rate type||LTV||Rate %|
|2 Year Fixed||85%||3.40|
|5 Year Fixed||85%||3.51|
|2 Year Fixed||80%||3.39|
|5 Year Fixed||80%||3.41|
|2 Year Fixed||75%||3.29|
|5 Year Fixed||75%||3.35|
|2 Year Fixed||60%||3.24|
|5 Year Fixed||60%||3.33|
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