Mortgage Rate Cuts
You probably hear the phrase all the time that ‘now is the best time to invest and set up a property deal’ – it is the slogan on the lips of every successful property invester around. But if the Birmingham Post’s recent story on mortgage rate cuts is correct, then this phrase could in fact be truer than ever before.
If like me you were disappointed when many lender’s chose to not implement the Bank of England’s latest cuts, then this story is fantastic news. Let me put it to you clearly. In the last week the following lender’s have released an array of mortgage cuts that could be very beneficial to your monthly cash flow.
- Abbey and Alliance & Leicester: 5 year fixed rate 3.95%
- Woolich: 4 year fixed rate 3.99%
- Lloyd’s TSB: 2 year fixed rate 3.29%
And Nationwide are cutting their fixed rate loans by up to 0.58%.
Yet despite this revelation, mortgage brokers have published the warning that fixed rate loans are highly unlikely to fall any further. If anything they strongly believe they will begin rising again, so now it the time to take advantage.
Now I myself am fortunate that all my investment deals have relatively decent interest rates, but for anyone who did get caught up in higher standard variable rates, making the change to one of these lower rates could be beneficial to your monthly positive cash flow.
Take this scenario for example:
You have got a £100,000 3 bedroom property that produces an average rental income of £683 a month. The monthly mortgage repayment on a property of this type on an interest rate of 6.43% is £671. Do the maths and that leaves you with a passive income of just £12 (tiny).
But if you were to take the same property, bought at the same price, with the same rental income, and had an interest rate of 3.29% as offered by Lloyd’s TSB, your monthly repayment would only be £489.
Subtract that from your rental properties monthly repayments and that equals a passive income of £182 – a substantial increase in profits.
With that perspective, it is perfectly credible to say that now is the time to act, and set up a deal.
Good Luck! xx
