Property experts are warning that steep inflation increases teamed with a subsequent rate rise could see another spate of repossessions in the next few months. Now Rick Flay, director at Belvoir Sheffield, the leading lettings agent in Sheffield is analysing how such changes could affect the rentals market and the residential landlord.
New figures published yesterday put the retail prices index (RPI) measure of inflation at 5.5 per-cent –The largest increase in over 20 years, adding momentum to the debate that interest rates could also see a rise in the coming months.
Rick Flay, Director at Belvoir letting agents in Sheffield, said: “The new increases mean that inflation is now higher in the UK than in any European other country except Estonia, Bulgaria and Romania, which is just staggering. With inflation at such sky-high levels, it is not surprising that economists are predicting an interest rate rise in the next few months, with some predicting as many as two increases before 2011 is out.
“Many homeowners are not out of the ‘danger zone’ just yet and are still coming to terms with the effects of the recession. As economic activity remains muted and unemployment figures continue to grow, any interest rate rise could have a catastrophic effect on those who only just managed to survive the economic downturn.”
Rick, from Belvoir who specialise in property to rent in Sheffield, added: “In recent weeks I have been speaking to landlords about these new predictions, and the general consensus is that any sort of rise will hit them in the pocket and cause more unnecessary pain.
Many of them brought flats at the height of the market, and on paper, capital values have dropped to a level where mortgages are now about the same as the value of the property. In some cases people even owe more than the property is worth. Any additional mortgage payments will not automatically be transferrable to tenants in the form of higher rents.
In addition, block managers who look after common areas are charging higher and higher fees meaning that the landlord is squeezed there as well. All in all many will not be able to afford to continue if rates rise by a significant amount.”
Belvoir Lettings Agency Sheffield is the One Stop Specialists for Lettings including Property Management, Tenant Find, Investment and Wealth Management Advice, Fit-outs and Renovations, Furniture Packs and Investment Property Insurances.
