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  • Writer's pictureConrad Binding

Path of interest rates - July

  • Recent rapid rises in interest rates have left borrowers wondering where this will end. The current Bank Rate is 5%.

  • In the short term there are expected to be further interest rate rises. The consensus of forecasts average at 5.6% for the end of this year. Over the longer term the Bank Rate is expected to come down: forecast to be below 3% again in 2026 and 2027.

  • The steepness of the increase is comparable with the sharp drop as the economy entered the Global Financial Crisis.

  • June inflation data had tentative evidence of improvement which could help improve the long term interest rate outlook. Source: #Dataloft, Bank of England

Swap rates trend lowers after improvement in June inflation data

  • Swap rates give us a good indication of changes to come in mortgage costs – reflecting the cost of borrowing for lenders.

  • The 5-year swap rates had settled to around 4% for much of the first half of the year but from May it trended upward (peaking at 5.5%) over concerns about core inflation.

  • Data released on July 19th brought some relief to this upward trend. June inflation data was better than expected. Headline inflation was 7.3% and core inflation 6.4%.

  • This better news on inflation filtered through into lower interest rates on 5-year swaps, dipping back below 5%.

  • Data could be volatile over the next few months, but this is a good initial indication that inflation is starting to come down. Source: #Dataloft,

Portfolio landlords still looking to expand

  • More than a quarter of landlords who own five or more properties are planning to increase their portfolio over the next year, while one in five who have 2–5 properties are also planning to expand (Rightmove).

  • Over half of landlords are planning to keep their property portfolios consistent or increase the number of properties they own. Single-property landlords are more likely to be looking to leave the sector.

  • Published in 2022, the English Private Landlord Survey 2021 found that 18% of landlords owned five or more properties but such landlords represented 48% of all tenancies

  • A Property Academy survey of close to 6,000 landlords indicated that over three-quarters of landlords owed less than half the value of their portfolio on their buy-to-let mortgages. Landlords with lower loan-to-value mortgages are less impacted by current market volatility.Source: #Dataloft, Rightmove, English Private Landlord Survey 2021, Property Academy Landlord Survey 2022

Renters planning to stay longer

  • The average length for an initial rental contract in Q2 2023 was 12.7 months, up from 10.5 during the same period in 2019. Renters are planning to stay for longer, in part due to low levels of stock and rising rents in the open market.

  • Renters are looking to remain in their properties for the longest amount of time in London, where competition between renters is extremely tight.

  • One of the most significant proposals in the Renters (Reform) Bill is the end of fixed term Assured Shorthold Tenancies (ASTs). Renter contracts are set to be open ended, allowing more flexibility for renters. Source: #Dataloft Rental Market Analytics. Data to end of Q2 2023

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