Transcription
For the last few years, interest rates have been pretty high. I mean, in August 2023, which is 2 and a half years ago, interest rates peaked at 5.25%. Now, they're 3.75, significantly lower, and they've just been dropping, budget after budget after budget, been dropping. I called this, and I'm I'm going to explain to you how I caught this.
But more importantly is, how does this affect you as a property investor? A mortgage and protection adviser called Yas Shaw wrote a very interesting article that was published on mortgageable which was last updated in September 2025 and it gives a very interesting look at the history of base rate and the history of mortgage rates and it's very surprising because people talk about base rate oh it's so high but actually over the last 30 years it works out around about 5.7% is an average for base rate. Right now it's 3.75%. So interest rates are actually pretty low at the moment.
Now why is this huge for property investors? Well, a couple years ago when base rate was 5.25%, what that meant is if you buy a house for £200,000 and you get a 75% mortgage, so your mortgage is £150,000, then your interest rates alone, not your repayments, the interest that you have to pay to the mortgage company are going to be around £700 a month. Lenders aren't going to give you a mortgage with anything less than base rate. So what that means is if your mortgage payments interest only are £700 a month on a 200 grand house, well your rent is probably only going to be a,000. Therefore, after you take into account property management and maintenance, your profit is zero. And that's why B tolet has been so difficult over the last few years because interest rates are high. Meaning that there's no cash flow, there's no profit in B tolet. But with interest rates dropping and not only dropping but rents going up, Berlet is becoming viable again in certain parts of the country. I'm very confident that interest rates aren't going to shoot up anytime soon as well. And I'm going to talk about why I think that. Of course, it's just my opinion, but I'm very, very, very confident.
So, what's going to happen to the future of property in the UK? Well, there's a lot of doom and gloom, but actually I think that property prices are going to rise a lot over the next few years. And the reason for that is because a lot of buyer landlords have been holding off. Not just buy to let landlords, firsttime buyers have been renting because they can't afford the mortgage payments. It doesn't make sense to buy with rates at 5.25%. But now they're 3.75. More people are going to enter the market. as more people enter the market, it means that suddenly there's more demand for houses, which means that the prices go up.
So, I think there's a sweet spot right now and an opportunity to buy, right? An added benefit for people that have been watching me for the last few years is when everybody else just said, "Buy till it's dead. I'm going to hold off." What I did and what my students mostly did was push the rents up via service accommodation and HMOs. Rather than saying, "I can't buy a house and rent it out for a grand when the mortgage payments are £700. It doesn't make sense." I said, "Well, why don't you rent it out room by room? Why don't you rent it out as service accommodation? Why don't you rent it out to housing associations at a higher rent?" All the people that did that, including myself, if we were making money when rates were 5.25%. Now they've dropped. It means that our cash flow goes up, which is also very exciting. So well done to those that did weren't defeist and didn't just say, "Oh, rates are high." But actually found a solution. Because if you can thrive when rates are high, when rates are low, that's when you're going to thrive even more.
Now, the interesting thing that's happening, and I've got a bit of an analytical mind when it comes to property, but I'd love to know what you think in the comments, is that there's a lot of doom and gloom. We had the budget, and everyone was talking negatively about how terrible the budget was, but actually, did anything really happen in the budget? Were landlords particularly penalized? Not really. I mean, the main thing with the budget was the fiscal drag, the the stealth tax, which is going to affect working people, employees. So, there's all this talk about landlords are being attacked, but actually, I don't really see it. There's the new Renters Right Act. Oh my gosh, section 21's going to be scrapped. It's going to be dreadful. Actually, it's coming now. Is it that bad? No. Is it hurting landlords? I don't think so. What is it doing though? Increasing rents whilst at the same time scaring off the amateur investors, the uneducated investors. So, what I actually see happening is I see house prices about to go up. I see rent going up. I see rates dropping for property investors and landlords. I think this is really, really good news.
So, how did I predict this was going to happen? And how am I using that same philosophy to predict what's going to happen in the future? Again, this is not financial advice, my opinion based on what I see. Mortgage companies, when you were trying to fix your rates in 2020, well, base rate was really low in 2020. So, the longer you wanted to fix the length of the mortgage for, the higher the rate would be. Why is that? That's because they knew the rates were going to go up. Whereas that switched in 2022 2023 when rates were high at 5.25 and everyone was saying they might go up to seven, they might go up to 10. I was confident they wouldn't on the basis that when I refinanced some of my properties, I realized, hang on a minute, the longer I fixed the mortgage, the lower the rate. It was cheaper to fix the rates at 5 years than it was at two. Why is that? That's because the mortgage companies and the lenders knew the rates were going to come down. So, I was quite confident the rates would drop. And I did predict even earlier this year, I said whilst chatting with a mortgage adviser that I thought the rates would be 3.75 by the end of the year. And now here they are exactly at 3.75. Also, from my personal experience, lenders seem to be a little bit more relaxed now than they were certainly a year or two ago. In 2024, Financial Conduct Authority FCA confirmed that mortgage lenders no longer have to apply rigid interest rate stress buffers, which we've seen as increased borrowing capacity, certainly compared to 2023.
So, despite what the media will tell you about property investing and being a landlord, I think right now is a good time. I think it's a positive time for property investors, but I do think house prices are going to go up. So, I'm reasonably bullish and I'm buying pretty aggressively investing in the UK. I'd love to know what you're doing right now. I'd love to hear in the comments. Now, sure, it's hard to make a deal stack in some of the south parts of the country. I mean, it was only a couple weeks ago. I was in Scotland and I invested into a property for £45,000 and that's a freehold property of course it's in Scotland and the rent on that is around £475. So it is possible to make very high yields in the UK. That was Scotland. But let me know your thoughts in the comments. Let me know what you think about the new base rate being slashed to 3.75. And until next time, I wish you all the very best on your property investment journey.