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Landlords fearful of rate rises


Friday July 16th 2010

A rise in the base rate of interest by just 1% would see a fifth of landlords unable to cover their mortgage repayments through rental returns alone, research has found.

The record low interest rate of 0.5% that the Bank of England has purposely kept suppressed in a bid to encourage lending has led to fears, particularly in recent months, of an impending rate rise.

Those fears have been more pronounced in the nation's buy-to-let landlords, 43% of which say a rise of 2% would see their rents no longer covering their mortgages.

The immediacy of the problem is illustrated by the research, which found that four out of 10 landlords are barely able to cover their repayments even with such a low interest rate at present, sparking fears that a Bank of England rate rise would tip them over the edge.

For 10% of landlords, a rate rise of just 0.5% would be enough to tip the rent-mortgage balance for them, research by Spareroom.co.uk found.

The findings illustrate the fresh challenges faced by landlords, many of whom are now caught between potentially devastating rate rises and an increase in Capital Gains Tax (CGT) from 18% to 28%.

The research also found that as many as six out of 10 landlords have already put rents up this year, some by as much as 5%.

Copyright © Press Association 2010

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