Buy to Let Liverpool and a Strategy for UK Inflation in 2021 and Beyond
Sunday 4th July 2021
Buy to Let Liverpool and a Strategy for UK Inflation in 2021 and Beyond
"Residential property is not cheap in today's frothy investment climate, but with inflation it tends to become even less cheap. This is not a time to be out of the housing market." Financial Times 2 July 2021.
As UK CPI inflation hits 2.1% in May 2021, just above the Bank of England target of 2%, what will be the impact on housing and the buy to let investor? Well, it's the forecast rate which is important and many economists are predicting 4% by Christmas.
There are many factors contributing to higher inflation both on the demand and supply side, but the risk to the buy to let investor in Liverpool and elsewhere is higher mortgage costs if you have a variable product. If you have a fixed term mortgage, then in the short to medium term you are OK.
Higher Mortgage Payments
Higher mortgage payments feed through to your net income. We constantly bang the drum of net income at Tuna Fish and everything we do is directed towards ensuring our landlords have the highest possible rents with the lowest attainable costs.
You have a number of options to hedge this rise in interest rates and in business terms, costs:
1. Speak with your financial advisor or mortgage broker and discuss the pros and cons and costs of fixing your mortgage payments over the long-term. With Bank of England base rates at 0.1% it's fairly certain the rate is not going any lower.
2. Undertake a Rent Review. We are in the process of doing this for our clients and do it regularly. If the rent is at the market, then you will have to absorb the rising the costs. However, very often, particularly when a tenant has been in the property for some time, the property maybe under-rented? It's a sensitive issue, but an issue you nevertheless must confront as a keystone element of your business. In my experience, tenants understand and in many cases their wages and salaries haven't stood still and as we move forward with labour shortages in some sectors, demand for further pay rises will be strong.
The Office for National Statistics (ONS) supports my point:
"Growth in average total pay (including bonuses) among employees for the three months December 2020 to February 2021 was 4.5%, and growth in regular pay (excluding bonuses) was 4.4%" In the public sector the growth is much higher at 5.2%.
Food for thought. If you are affected and want to have a chat about your strategy and how Tuna Fish may help you, then please feel free to call or contact us for a confidential and free consultation.
