The year 2016 closed with a lot of uncertainty and instability in the local and global political climate, with consequent effects on the economy – more specifically on the property market.

With that foggy cloud drifting into the New Year, 2017 is looking like it would be a testing period for the UK property investors. Although the Bank of England has attempted to inject some control and stability into the system with historic low interest rates and stamp duty, many prospective buy-to-let investors are still bothered about how their investments would be affected in the event of a sudden mortgage rate hike.

Why interest rates rise

Primarily, central banks, such as the Bank of England in the UK, use interest rates as a fiscal tool to control inflation. With a rise in inflation, the central bank will increase its base rates, which forces high street banks to increase their interest rates on mortgages, loans and credits. The implication of this is that borrowing becomes more expensive, demand for loans drop and inflation falls.064996_eb375797

Will mortgage rates in the UK rise or fall?

It would have been easy to give a straightforward answer, but with political and economic uncertainties in the air, the best anyone can do is to speculate. In the last one to two years, a lot has happened in the world and we are still watching for the impact of these significant events to unfold fully.

The global slump in oil prices, the UK Brexit vote, the political changes in the US, along with new economic, sometimes drastic policies, directly or indirectly impact the world economy and ultimately real estate. Also, sometimes a lot can happen in short while things can change quickly. So, the best attitude is to be prepared always.

Property shortfall in spite of higher stamp duties

As the 2017 property landscape continues to unfurl, it is expected that residential buy-to-lets will be more heavily taxed than previously. Notwithstanding, there will continue to be a deficit in the UK real estate market, coupled with a rise in demand. The disequilibrium in the demand and supply of housing units is forecasted to lead to price increase in 2017, or, at worst, remaining at flat rates.

How will unstable stamp duty & interest rates affect your UK property investment?

As a property investment, your first concern will be how mortgage rates will impact the value of your assets. Higher mortgage rates increase housing costs- making less people able to buy, which is not good news to the investor, as it always means that price growth will slow down as a consequence.

However, besides mortgage rates, there are other factors that determine property prices, such as location, public institutions like libraries and universities, public transport network, local infrastructure like hotels, regeneration projects et cetera.

Notwithstanding that, the best bet for a property investor is to get landlord insurance, as it protects the landlord from financial loss in the face of such uncertainties.

Landlord insurance or a buy-to-let insurance combines different covers to protect a landlord, and is important for anyone renting out their property.