Another mortgage lender has followed the trend and increased its mortgage rates by 2%. This rise was fuelled by 2 recent interest hikes made by the ECB (European Central Bank). For landlords who own one property or more, this could prove to be financially problematic. Let’s look at the details.
It is Estimated that mortgage average monthly payments could increase by up to €300 per property. The actual rise of the increase will be based on loan to value and/or term of the fixed rate.
What this means to new homebuyers is that if they opt for a drawdown mortgage with a 90/10 loan to value ratio, their interest would increase from 3.95% to 5.95% and this is representative of 3600e more per year.
At current interest rates do not show any sign of stabilising, so a lot of property owners and new buyers are questioning at what point will interest rates stop rising.
How high can mortgage interest rates go?
The ECB has indicated that interest rates are likely to continue climbing, which in turn causes lenders to increase their rates on both variables and fixed mortgages. The ECB have already hiked rates up by 2% and they have indicated this figure is likely to increase again to 3% by early 2023.
The biggest concern for landlords is that buy-to-let mortgages will increase in tandem also, with industry experts predicting they will hit 6.8% before the end of the year.
Finance Ireland who are the most recent lender to increase their rates made the following statement:
“Over 80pc of our loan applications in the past year have been for fixed terms of 10 years or more as customers look to lock in certainty in a period of widely forecasted interest rate increases.
“Overall, we have funded strong mortgage volumes through this year, however these interest rate increases we are implementing are a direct result of significant increases in funding costs over recent months.”
How do rising rates affect the rental market?
Landlords traditionally buy houses using a buy-to-let mortgage, but on Thursday night over 500 of these mortgage deals disappeared. The average interest rate last year for a buy-to-let mortgage was 3.25%, the average rate now is 5.26%.
Essentially landlords costs are set to rise, so it is more important than ever to ensure occupancy rates are kept as close to 100% as possible and that the property is kept in line with all legal requirements ensuring that no extra unneeded costs are created such as sanctions or legal fees.
If you are unsure on any aspect of managing your property then there is readily available expert advice, any questions you have can be answered by the KPM Group
Property Management Company Dublin
KPM Group has helped countless landlords free themselves from the day-to-day management of their portfolios and trust us to deliver the maximum return on investment while providing quality property management services.
We have an experienced team who can either advise or project management every aspect of your property management, this includes marketing the property to a broader scope, on platforms that will attract your ideal tenant demographic to assisting in selecting the perfect tenant for your property
If you would like to speak to us here at KPM about your portfolio, then get in touch today, and a staff member will be happy to help in any way we can.
