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  • Mortgages & Finance

    Woke up with interest rates on my mind



    Morning all. 

    Woke up this morning on a day off with interest rates on my mind. 

    None of us no what the future will hold but where do you think interest rates will be in 5, 10 and 20 years time, and what % do you stress test your portfolios at? 

    Also landlords with interest only mortgages do you have plans in place to pay down any of the mortgage debt, or do you just plan on inflation and rising prices eroding your debt? 

    Any replied are much appreciated. 

    Thanks.

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    I can't see interest rates going up significantly for a very long time to come and I think they are fairly low down on the list of landlord worries.

    Having said that, as mortgage rates are so competitive at the moment, I am just in the process of re-mortgaging two properties onto five year fixed rates with Precise.  I am pulling out a bit of equity for a war chest and my payments are only going up by £100.00 per month per property.

    That gives me peace of mind as I only have a few now on variable/tracker rates.

    I think fixed rates and a cash buffer should protect you from most of the threats.

    I am sticking to my strategy .... Focus on cash flow month on month, stay in the game long term, and at the end of your landlord career you will have a number of options to choose from.

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    At present there a truly massive amount funds looking for a home, really trillions. Soverign wealth funds are busting with cash and a safe home is more important than high returns. With such a mountain of cash I think that low interest in the UK is here to stay. Not wishing to get into Brexit but the UK is seen as a vey stable, well run economy with a legal system of high repute. Qatar and Norway have announced massive UK investments as have other funds.

    I have a relative, a lawyer in Russia whose business is making legal agreements between Russian companies under UK law as it is seen as copper bottomed. Don't under estimate the UK!

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    If I can I pick 5 year fixed and I have a selection of Repayment and Interest only

    I know in 7 years I have Interest Only Mortgages to be paid off

    so my plan is to set aside funds to pay down if I need too

    all of my Company Mortgages are on repayment

    I think we should all have a plan for this one way or another

    Rates have to rise but I listened to a Finance expert and he thinks when we leave the EU rates will go down

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi DL

    "all of my Company Mortgages are on repayment"?

    Wanted to understand the reason behind this decision? I'm assuming that by the above you meant BTL properties under a Limited Company rather than commercial mortgages.

    I currently have all of mine on Interest Only purely for cashflow reasons. However, based on your comment and experience, makes me suspect that I might be missing some trick.

    Would love to get your feedback.

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    Saagar

    Disclaimer: I have no legal expertise nor am I a qualified advisor on any subject. A humble landlord using an open forum to exchange ideas and experiences. 


    The reason I use C&R is historic with me

    It goes back to S24

    when S24 was announced I relised my S24 problems would have been much smaller now If I had used C&R 10 years ago

    also I am a NE Landlord and I dont really factor in Capital Growth  If it happens thats a plus

    so I am building in a better LTV even if I have zero capital growth in 10 years

    ie I buy a property for 80k take out a mortgage of 60k and my debt at the ten year point will be 40k  so with zero Capital growth I have a 50% LTV

    and if the Govt were to tax companies further as they did with S24 I would be better off

    Its belt and braces for me now

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Thanks for explaining your rationale
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    Saagar

    Disclaimer: I have no legal expertise nor am I a qualified advisor on any subject. A humble landlord using an open forum to exchange ideas and experiences. 

    Hi @DL

    Do you find that Repayment Mortgages for a company is an uncompetitive sector of the market, and do your rates suffer as a result?

    Cheer

    ML

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    I am in the NE so my average mortgage is around 60k so i dont think it makes a huge difference to be honest

    In a company I like to pay down debts

    some say I am wrong But I learned a lot from S24

    I dont think companies would have the same treatment as S24 but I just dont wish to risk it

    so belt and braces on a 25 year CR Mortgage I will have a third of the capital payed off at that point so I fee happy with that



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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    ECB base rate I think is 0%

    UK base rate 0.75%

    USA base rate 2.5%.

    We live in a financially connected world.  Billions move around the world at the click of a mouse.  No major currency can afford to be too much out of kilter with those that it trades with.   They will all need to move in unison. Bear in mind that when the BofE raised rates from 0.5 to 0.75% that represents a 50% rise in rates.

    The BofE's long term aim is to get interest rates back to normality which is that they move between 3 and 5% depending on economic circumstances.  My guess is that it will take another five years at least to get to 3% if not longer.

    Having lived through 30% inflation and 15% mortgage rates, the current situation is utopia.

    However,  John McDonnel has said that he will remove the power of the Bank of England to dictate interest rates and that will become a political decision.  God help us all.   Read this from today's Times. This is from an article Corbyn and McDonnel wrote in the 70s and I doubt they have changed their mind.



    Socialist blueprint
    A Labour government will have to bring back wartime exchange controls and interfere with the price of shares to prevent a financial disaster, Mr Corbyn warned the Socialist Organiser.

    The future party leader predicted that the markets would react so harshly to the Conservatives losing power that drastic measures would be needed to rescue the economy. Mr McDonnell, now shadow chancellor, told the same newspaper that he was dedicated to revolutionary socialism rather than just a reform of capitalism.

    The hard-left pair this week oversaw Labour’s joint worst polling result since records began. However, the Warwick University archives show how they set out to put their core beliefs into practice decades ago.

    “The reality is that a Labour government on being elected will face an immediate financial crisis. It happened in 1945, 1964 and 1974. It’s how the government reacts to that crisis that is the issue,” Mr Corbyn wrote in a report for the newspaper as a backbench MP in 1985. “We believe that the only way that a Labour government can maintain itself in office and carry out its programme is by confronting that crisis — by putting a ban on the export of capital, by being prepared to control dividends and share prices, by being prepared to direct investment and bring into public ownership the largest industries.”

    Exchange controls to prevent a run on the pound were introduced to protect the British economy during the Second World War and survived the postwar peace. In 1964 the Labour prime minister Harold Wilson even banned the public from bringing more than £50 when travelling abroad.

    Margaret Thatcher abolished exchange controls as one of her first acts after taking power in 1979.

    Some of Mr Corbyn’s radical proposals for the stock market have precedents. Restrictions on dividends have been imposed as a tool to prevent undercapitalised banks from draining money to their shareholders. Nationalising the largest industries and directing investment are traditional socialist ambitions. Controlling share prices would be more novel.

    Mr Corbyn’s prediction of a financial crisis when Labour was next elected did not materialise because the party was taken over by “New Labour”, and by the time of Tony Blair’s victory in 1997 it had embraced social democracy and capitalism while explicitly abandoning socialism.

    Mr McDonnell committed to the revolutionary overthrow of capitalism in an interview in 1985, when he had just been ousted as Ken Livingstone’s deputy leader at the Greater London Council in a row over defying the Thatcher government on spending.

    As shadow chancellor, Mr McDonnell has been mounting a charm operation in the City of London nicknamed the “tea offensive” and last year even attended the high feast of capitalism, the World Economic Forum in Davos.

    Mr McDonnell told Socialist Organiser: “The division needs to be clearly categorised as between revolutionary and reformist . . . What we are seeking to do is to bring together those people who are genuinely revolutionary [and] discard those elements that are reformist.”



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    The 2 year and 5 year gilt redemption yields are similar so the market is not seeing a rate rise over this period. The 10 years is about 25bps higher so expectations are of a longer rise.

    More important is the rise in rents...
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022