What does the BoE’s second base rate cut this year mean for landlords?
The Bank of England’s recent base rate cut holds significant implications for landlords across the UK.
Landlords with variable or tracker mortgages, which tend to follow the BoE base rate more directly, may benefit from lower monthly mortgage payments, potentially increasing profitability or providing breathing room in an environment where rental yields have been under pressure due to rising costs and regulation.
However, the impact of the base rate cut varies according to the type of mortgage a landlord has. Landlords with fixed-rate mortgages will not see an immediate change in their repayments because they are set for a specific time period. However, once their fixed terms expire, landlords may be able to secure a new deal at potentially lower rates if banks apply the reduction to mortgage products. This may allow landlords to either lock in a lower rate or negotiate terms with their current lender.
In addition, landlords may benefit from this rate reduction in light of rising costs such as energy, repairs, and property compliance. Lower mortgage repayments free up cash for property maintenance and compliance with changing rental regulations, such as Minimum Energy Efficiency Standards (MEES).
It is worth noting that a base rate cut can have an impact on tenants. While the Bank's decision is intended to encourage borrowing and spending in the economy, tenants may benefit indirectly if landlords choose to pass on savings or reinvest in property improvements. Nonetheless, rental demand and competition remain strong, so rents are unlikely to fall as a direct result.
In summary, the BoE's rate cut provides a potential financial cushion for landlords, particularly those with variable mortgages, and allows them to explore favourable refinancing options when fixed terms expire.
