How much does BoE base rate influence landlord decisions?

This follows the central bank’s original decision to pause rate hikes in September 2023, after 14 consecutive rises that began in December 2021.

This decision came in the form of a 6–3 majority vote to maintain the rate at 5.25%. Two members preferred to increase the rate by 0.25%, to 5.5%, with one member voting to reduce the rate by 0.25%, to 5%. It’s a decision which follows subdued inflation figures released by the Office for National Statistics (ONS) as the Consumer Price Index (CPI) rose to 4.0% in December from 3.9% in November.

The topic of interest rate movement is likely to remain a key conversation for intermediaries and their clients over the coming weeks and months and its potential impact was certainly evident in latest BVA BDRC Landlord Panel research for Q4 2023.

The research found that just over half of landlords’ business prospects are influenced by the BoE base rate. Landlords with larger portfolios (with 11+ properties) were reported as being more likely to be influenced at 69% vs 39% of landlords with one property, although 50% of landlords with 2-3 properties expressed how likely they are to be influenced. In addition, the data outlined that 79% of landlords with BTL mortgages are influenced by the BoE base rate vs. just 18% of landlords without BTL funding.

Looking forward, on average, landlords expect the BoE base rate to be approximately 4.3% at the end of 2024. This average is mostly consistent across portfolio sizes and across both leveraged and unleveraged landlords. 

Although it’s hardly surprising that the influence of the base rate will rise in line with portfolio sizes, this does indicate the importance of the advice process in ensuring that all landlords can successfully navigate any interest rate hikes or fall. Not to mention the role being played by specialist lenders in generating competitive and responsible options, especially for those larger portfolios.

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