(1888PressRelease)
September 24, 2007 - Following the release of Bank of England minutes yesterday, economic analysts have been quick to predict a drop in the interest rate and a slow down in the housing market.
In today's Times for instance, Simon Rubinsohn - the chief economist of the Royal Institution of Chartered Surveyors (Rics) - says that the housing market boom is over and that prices are going to stagnate and come down.
London house prices are going to stay level for the whole of the coming year, he predicts, contradicting an earlier Rics forecast which saw them rising by around three per cent.
In addition, the cost of borrowing is expected to go up as banks pass their increased borrowing charges on to consumers. It all stems from the meltdown of the US subprime housing mortgage sector, which has seen American banks hit hard through bad debts.
This has in turn increased the price that British banks have to pay to borrow money on the international market, which prompted a crisis for Northern Rock, culminating in an emergency loan from the Bank of England.
So with market conditions spelling a gloomy near future for house sales, does the buy-to-let investor have anything to fear? The Association of Residential Lettings Agents (ARLA) doesn't think so.
Spokesman Malcolm Harrison doesn't think that the recent interest rate rises will serve to affect the buy-to-let industry as "a very high proportion" of buy-to-let investors have fixed-rate mortgages that allow them to determine exactly what their repayment amounts are going to be.
With economic analysts predicting that interest rates have now peaked and may be on the verge of coming back down, the cost of borrowing may even be on its way back down, which can only be good news for investors.
A slowdown in house prices won't stop people investing in buy-to-let, says Mr Harrison, "because buy-to-let is quite predictable, in that if there is a slow-down in house prices you know there is going to be more rental demand, and that always means the case of a thriving rental sector".
And the 'credit crunch' that has been so widely reported in the media won't mean a reduction in the opportunities for people seeking buy-to-let mortgages, he says, "because most buy-to-let investors, new or experienced, actually go to mortgage lenders with a well-thought out proposition, and that proposition generally includes quite a high deposit and conservative expectations of the rental value".
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