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Hi

 

I am new to the property hub but love all the information and podcasts!  I need some advice.  I am remorgaging my 4 bed rental in Clapham, London.  It is a great rental and always has been.  We are applying to split the flat into 2 separate appartments.

 

My question is: given that Labour government is likely to be voted in sooner rather than later, should I go for 5 years locked into a higher interest rate or 2 years at a lower rate?

 

With the five years, my thinking is that this would see us through any possible turbulance in the marketplace whereby it would be even more difficult to re finance. No one can see into the future but the word 'greedy landlords' has been banded around too much.

 

Would really love your thoughts and input.  Many thanks and good luck with all your own ventures. 

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We're just getting two remortgages and an new mortgage and I've been going through the same process. We've ended up going with 5 years, taking all costs into account they end up being about 20% a month more expensive, for the first two years at least, but I can only see one direction for interest rates to go at the moment.

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Good question Lizzizita,

 

Points to consider are:

  1. Will you want to take equity out of the property in the next five years? I like 2 year fixed as I then re-mortgage based on value I've added and / or rising property prices to withdraw equity for my next purchase.  Being tied in for 5 years really affect me but that is just my strategy, it's worked well just now as property prices are rising nicely in my area.
  2. Listen to some of the podcasts about mortgage rates, I remember a few times Rob B has given his view on interest rates. He talks about when BoE base rate was circa 5% (10 years ago) , BTL's were 5.5%, i.e. a 0.5% margin.  Now the BoE base rate is 0.25%, BTL's are about 2.75% i.e. 2.5% margin for the banks.  This means there is room for the banks to absorb any rise if they wish and a rise in BoE base rate does not necessarily mean a rise in mortgage rates. Of course this is just an opinion as what may happen in the future.
  3. As Paul mentioned, cost it out, look at some worst case scenarios on a spreadsheet.  I have a 'what if interest rates rise to 5.5% spreadsheet'.  look at where your property breaks even and if it's tight if rates were to rise a couple of percent and the fixed 5 year makes you money then the fixed may be the safe option.  I have monthly margin at the moment and know I can make money until 5.5% including Section 24 changes fully implemented therefore 2 year for me works.

Hope that helps a little :) 

 

Ollie

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