Variable rate mortgages are becoming increasingly popular in the UK. However, as interest rates rise, so do mortgage payments. This increased cost is cutting into profits and, in some cases, causing investors to default on their loans.
Some landlords have even seen their mortgage payments increase five times (and by over 20%) just this year! This, alongside soaring energy bills, can have devastating effects on landlords, with some landlords already at the tipping point of their outgoings exceeding their income.
The Bank of England has raised interest rates four times this year. Last week, they decided to increase it again by 0.25% to 1.25%.
Angus Stewart, the CEO of Property Master, stated “the average rate for a two-year fixed rate loan of £160,000 with a 40% deposit would cost a landlord £395 per month. “The same mortgage but on a variable rate was £661.” This is a jump of 67%.”
If you’re worried about your variable rate mortgage, you can look into switching to a fixed rate mortgage, so long as your mortgage agreement allows it. However, be aware that if you do switch, it may mean that you’re locked into that rate for the remainder of your mortgage term.