Base rate cuts improve landlords’ margins

Permalink: Base rate cuts improve landlords’ margins
by Gill Montia

Buy-to-let lender, Paragon, is pointing out that landlords are finally benefiting from cuts in the Bank of England’s base rate.

During 2008, landlords were typically faced with high interest rates and refinancing difficulties.

According to Paragon, mortgage arrears doubled in the three months to the end of December, with the lender reporting that arrears on its mortgage book rose from 0.53% at the end of September, to 1.07% on 31st December.

At the same time competition in the rental industry increased and some landlords began a slide into negative equity as house prices fell.

However, this gloomy scenario has been improved by aggressive cuts in the base rate, which is currently down to 1.5% and could fall further this week.

As a result average rates offered by Paragon are now down from 8% in 2008, to around 4%.

The buy-to-let mortgage market overall has responded with better deals that are enhancing rental margins and should ultimately stem the rise in arrears.

However, Paragon remains closed to new business having ceased new lending during 2008 when money market rates soared.