property investment in times of high interest rates

Property Investment in Times of High Interest Rates

With the Bank of England raising the base rate for the tenth consecutive time earlier this month, many property investors are rightly worried about the impact of high interest rates on their investments, making it harder to generate positive returns.

Will interest rates rise again in 2023, putting a further squeeze on profits? How can struggling buy-to-let landlords capitalise on the many opportunities currently out there while avoiding the impact of soaring interest rates?

Rates May Be Nearing Their Peak

With the Bank of England under continued pressure to manage inflation, which has been recorded at 10.1% in the 12 months to January 2023, the answer to whether there will be further rate rises is almost certainly ‘yes’ – although many analysts expect rates to peak in the summer at around 4.5% as inflation slows.

Although this predicted peak is lower than first feared, interest rates have soared dramatically over the last year or so, with a series of rate increases – the latest announced on 2nd February 2023 – meaning the base rate has reached 4%, its highest level in 14 years.

While high interest rates have affected anyone with a mortgage, the impact for buy-to-let investors has been particularly severe, with the greatly increased cost of borrowing making it much harder to generate positive returns.

Although buy-to-let mortgages have retreated a little from the chaos that followed the government’s disastrous mini-budget, landlords continue to battle with soaring rates and hefty fees. Latest data shows that average fixed rate deals have jumped from just over 3% last March to almost 6% in February 2023, although they are following a downward trajectory from their peak around November last year. 

Since mortgage rates are heavily influenced by the base rate, rate rises have meant challenging times for landlords who are also grappling with increased taxation and ever-changing legislation, including a much-talked about shake-up of the UK private rented sector set to come into force this year.

For those with mortgages, many landlords have seen their repayments more than double, significantly reducing profits and in some cases wiping them out entirely. Securing a new fixed rate deal will likely bring a significant rise in monthly repayments, along with often hefty fees on new deals with the most attractive rates. Even though current deals are more favourable than they were a few months ago, they are still significantly higher than they were before the beginning of 2022.

Many Opportunities Out There

Despite the challenges, there are many opportunities out there – especially for those in a position to invest without mortgaging a property, or who are able to acquire properties at scale, like Avora Capital.

Indeed, many larger landlords are actively looking to expand their portfolios in the year ahead thanks to an expected drop in values making it easier to negotiate deals and secure properties at more favourable prices. This, combined with continued strong rental demand, means potential rich pickings for those in a position to overcome current market challenges and capitalise on the most lucrative sectors, including social housing.

Clearly, times of high interest rates make mortgage-free property investment highly desirable – especially given the many other hassles associated with owning and renting a property as a private landlord.

At Avora Capital, we offer a hands-free investment solution where investors can purchase a share in our diverse and disciplined portfolio, delivering a number of additional benefits such as:

  • No management fees
  • No estate agent and maintenance costs
  • No stamp duty to pay
  • No extensive paperwork or dealing with tenants

For more information on Avora Capital, please fill out the form on this page and we will be happy to assist you.

Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.

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