Fixed Mortgage rates rise 0.16%!
As an investor it is always important to offer your rental properties the best possible mortgage deals, but as banks are now proving, this task could soon be a lot harder.
In the last week, Moneyfacts has reported on average rises of 0.16% on 2 year fixed rate deals, with 5 year deals quickly following suit at 0.21%.
So what happened?
According to Moneyfacts this rise has been triggered as a consequence of inter-bank borrowing, and their rising costs. More expensive to borrow from, banks are now practically stumbling over one another as they try to pump up the cost of their fixed rate deals.
Is it that bad?
Now on the one hand you could argue that a 0.16% rise is nothing, but on a mortgage of £100,000 this could prove to be a substantial increase in the long term.
Take a look at the following scenario.
If for example you chose to invest in a £100,000 property (with a 25 year mortgage) on a fixed rate of 4.74%, that would equate to monthly repayments of £570. However, take this same property at an increased rate of 0.16% (bringing it to 4.9%) and you could face an additional monthly repayment of £9 (£579 in total).
On the outset, £9 extra a month is nothing, but spread that figure over a year and that is £108 more than you would have had to pay on a fixed rate deal of 4.74%.
When you examine the figures like this, it is easy to see why property courses encourage you to invest as soon as you can. If rates can change this much in a week, imagine what we could be facing in a year.
Wendy xx
