Possible interest rate rise may push rental values even higher

It’s obvious that the Bank of England and the government are caught in a dilemma over the current state of the property market. If Mark Carney decides to raise interest rates to reign in the rise and rise of property prices, will that have a negative impact on other areas of the economy that need help?

I suppose the answer is, yes, it probably will.

Of course, the beauty of buy to let as an investment tool is that what you lose on the capital gain swings you usually gain on the rental yield roundabouts. If many struggling first-time buyers are stopped from getting on to the proverbial housing ladder their only real alternative will be renting, which will, assuming there is not a general decline in incomes, drive up rents even higher. This is of course great for landlords but not so great for tenants.

It’s impossible to be original when discussing this dilemma because the only real answer is to build more flats and houses, both to buy and to rent, coupled with of course the need to get a proper grip on immigration into South East England.

As a caveat for landlords, rising rents do carry the possibility of more widespread defaults by tenants and does underline the advisability of protecting your rental income.

 

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