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Rising Rates? Here's How Smart Hosts Handle Mortgages · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

• 0:00
  Interest rates are rising and for holiday let owners, that
• 0:03
  changes everything. Deals that worked a few years
• 0:06
  ago might not stack up anymore. Monthly payments are going up,
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  lenders are stricter, and getting your mortgage wrong now
• 0:14
  can seriously hurt your cash flow.
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  So the question is, are you set up to survive and still grow in
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  a rising rates market? In this episode of Houseplanner
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  Bite Size powered by Housefully, I'm joined by Joe Stallard from
• 0:29
  AAA Mortgages. He's going to share 5 essential
• 0:32
  mortgage tips every holiday let owner needs to know right now.
• 0:37
  Let's get straight into it, Joe Thank you for joining us on host
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  planet Bite Size. The global situation is
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  unpredictable, to say the least. Mortgage rates are rising as a
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  result, and the prospect of base rate cuts has been diminished.
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  How should Holiday let owners navigate a rising mortgage
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  market? You've got 5 tips to share, so
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  take it away with tip #1. Yeah, we do indeed.
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  So I think the first tip really is for anyone who's purchasing
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  start as soon as possible or for anyone who's remortgaging, start
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  that process sooner rather than later too.
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  So if you're switching to a new lender, most mortgage offers are
• 1:17
  going to have a six month validity on them in which you
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  can complete. So by doing that nice and early,
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  you can lock in, secure your products if all gets approved.
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  And then if you're working with a good broker as well, they'll
• 1:30
  look at things and see if things come down in those in that time
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  before you complete. Then there might be the option
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  to move you down to A to a lower rate before you do complete.
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  Conversely, if things keep going up, then it doesn't matter.
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  You've got your your rate secured.
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  So acting sooner rather than later, rather than burying your
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  head in the sand, I think is definitely hit #1.
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  Yeah, definitely make a call, send the e-mail, get in touch
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  with with the experts here. I mean, how volatile are things
• 2:00
  right now? Are things just going up and up
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  and just explain why is it so volatile at the moment?
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  Yeah, it seems crazy, doesn't it, that, you know, geopolitics
• 2:13
  have such an implication on, on UK mortgage prices.
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  Ultimately, I think it's at a very top level linked to price
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  of oil and how that affects inflation in this country, which
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  then ultimately effects things about how the cost of money at
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  which banks lend to one another and what's happening with
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  inflation and how then the government and lenders are
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  looking to control that inflation through things like UK
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  mortgage prices. So that's the top line view as
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  to where things are AT. And I think until the worst
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  thing for for lenders, for consumers is, is uncertainty and
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  volatility in a way. Even if things are bad, if
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  people know where they stand, it's not so bad as the unknown,
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  if that makes any any sense whatsoever.
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  So whereas there is the potential for costs to keep
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  going up, lenders need to price accordingly.
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  There's also on top of that then a service element to this.
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  So it's not all driven by that, it's driven by the fear of that.
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  But then also no lender can really afford with their rates
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  to stay top of the tree for too long because they'll get swamped
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  with business that they then can't service effectively.
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  And so that means they're having to pull rates and put rates up
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  as well to make sure that they're not taking in in too
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  much of A particular type of lending.
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  So there's a multitude of factors that really feed into
• 3:37
  that. There's an interesting
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  psychology there, isn't there? I mean, do you see this a lot
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  with lenders? They'll have a rock bottom rate,
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  but once they've kind of filled or got all the customers they
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  want, then they put their rates up because basically they don't
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  want any more customers. Yeah, and it's not always the
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  customers they want. You know, sometimes they'd love
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  to take on more, but they're very regulated in sort of the
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  types of business they can take on.
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  It can be only certain percentages of their book can be
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  led to certain customers, for example.
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  So, you know, looking at the residential market, they have
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  flexibility to do some increased affordability multiples, but
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  only on a certain percentage of their business.
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  So certain lenders might target that really towards first time
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  buyers, for example. So there's this whole melting
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  pot that lenders are dealing with and then the like you say,
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  the psychology about right, well, what's our competitor
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  going to do? We can maybe have a day, two
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  days top of the tree, but then beyond that, we've got nobody
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  into service that business. Our standards are going to fall
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  and it can just, you know, by them getting a little bit maybe
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  greedy and taking on more than they should, they can then pay
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  for that, but for weeks, if not months through trying to catch
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  up and service the business properly.
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  So there's a whole load that goes into it.
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  Yeah, it's interesting. I think to the outsiders, people
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  who don't really know much about mortgage lending, you just
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  think, well, if you've got a product and you've got loads of
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  customers, you want to give them as many as possible.
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  But the fact is they can't because they are regulated.
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  They can only give a certain percentage.
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  So yeah, it is, it is pretty strict.
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  All right then, Joe, so tip #2. Tip #2 is to then review the
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  length of if you're going for a fixed rate deal, review the
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  length of that fix carefully. An interesting one, I think the
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  majority of people in the country have a kind of like to
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  know where they're at from a budgeting standpoint.
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  There is a big sort of sway towards fixed rates in general.
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  And then now we really need to consider the rate of, of what
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  you're fixing in for. And you know, that longer fix is
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  going to offer more certainty to you, maybe a five year or
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  something like that. But then again, does a 2 year
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  fix give you the certainty that you crave in the short term, but
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  allow the remortgage opportunity if you think rates are going to
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  come down in the meantime a bit sooner on a, on a 2 year or
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  maybe a three-year product. So, you know, it's again, not
• 5:58
  being about, you know, rate driven.
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  It's, it's what is, what is the right thing for me, my
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  circumstances, you know, you don't know what rates are going
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  to do. I don't know what rates are
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  going to do. If we did, we'd be a lot
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  wealthier and probably not having this conversation because
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  we'll be on a on a beach with a pina colada somewhere.
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  But it's, you know, what are you, the client think is going
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  to happen? What's your the type towards
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  risk and elements like that and then bringing that into your
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  product choice? I think if there's anything that
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  we've learned over the last few years is that things can go up
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  very quickly, but also things can come down fairly quickly as
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  well. I mean, this situation, any Bank
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  of England in terms of interest rates and mortgage rates and
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  stuff, things could move fairly quickly.
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  So like you say, they're locking yourselves in for 3 five years
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  now might not be the smartest route moved.
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  I mean, do you think there will be some people out there who
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  just they want the flexibility and they'll, they'll, you know,
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  maybe have a much shorter fixed rate or they'll, they may be
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  happy to go on a variable at the moment?
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  Yeah, absolutely. At the moment it's, it's
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  certainly conversations that are happening a lot of the time.
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  There is also, though, you know, it might not always be the right
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  financial thing to do, but there is this intrinsic psychological
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  value we need to weigh up. And for some people going
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  through a remortgage process and producing bank statements and
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  income docks and having a conversation, all this sort of
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  stuff is just a pain in the backside.
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  They really don't want to do so. They might get that maybe a two
• 7:30
  year is better, but for them, set it, forget it, five years.
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  That's, that's us. We're happy.
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  We know, we know what we're paying, we know we can afford
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  it. So every single client is
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  different, and I guess the job of a good broker is to try and
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  tease out those thoughts from people and recommend
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  accordingly. All right then, Joe tip #3.
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  Will you take me up nicely really James, because I think
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  tip #3 was really considerable. Consider variable rates.
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  We're in a market whereby at the moment with base rate holding,
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  you know not too many lenders are doing anything to their
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  standard variable rates. So the discounted style products
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  we have in the holiday let space are often coming out lowest cost
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  for four people. Now as I said, that comes with
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  the view that people need to be comfortable that mortgage
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  payments can change month and need to be fine with that
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  element of risk. If you like, you know, all the
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  standard typical warnings apply, we're taking a variable rate
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  product. But actually having that
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  conversation and putting it into the mix for something to
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  consider, you know, can be a really important idea for people
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  at the moment, I think. Definitely, yeah.
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  I mean, I've, I've been on variable rates for the last
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  couple of years. It wasn't so good around the
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  time of Liz Trust being Prime Minister, but it's been all
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  right in the last 18 months or so.
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  Things have slowly kind of come down a little bit.
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  So yeah, you take the risk. But when we're in a situation
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  like this, which is a little bit more volatile and the the
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  lenders are kind of hedging a bit and worried about where the
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  base rates going to go, it might not be the worst option in the
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  world. But it really does depend on
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  your on your personal circumstances here, I think.
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  Personal circumstances, personal opinions as well.
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  You know, it certainly won't be for anyone and in certain
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  circumstances the fixed rate will be the lowest cost option,
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  but I think opening the mindset to having a look at them as well
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  and seeing if it is something you can get comfortable and get
• 9:33
  on board with, it might work out the right thing for you all.
• 9:37
  Right then, quick pause. This series is powered by
• 9:39
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• 9:42
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• 9:45
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• 9:48
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  guidebook books for life. There's also a link in the show
• 10:07
  notes to book a demo with Frank Bosey, who's a big friend of our
• 10:11
  show. All right, back to it, Joe,
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  what's tip #4? Tip #4 then is a really generic
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  mortgage point, but one that I think a lot of people look over
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  and that it's not just about the rate.
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  You've got to look at the whole cost of a product.
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  So you know, it's very easy to talk to.
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  You make down the pub and he's got a cracking 3% rate that you
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  know you'd bite your arm off for.
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  But in reality that these mortgage products they're
• 10:35
  made-up of, yes, the rate which affects the monthly payment, but
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  then there's also upfront fees and costs.
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  And often to get those lowest rates, the products are going to
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  have fees on them. Sometimes that's going to be a
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  percentage based fee to really get that rate as low as
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  possible. But the lenders not doing that
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  out the kindness of their own heart.
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  They're going to make their money one way or another.
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  So if they're not making it on the on the rate and the monthly
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  payment, they're probably going to make it on the fee.
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  But then there's also incentives, application costs,
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  valuation costs. Not all products have those.
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  There will be some products that have bigger overpayment
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  allowances than others, and that might be a real part of your
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  strategy for getting this mortgage paid off.
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  There are so many features that go into a mortgage product.
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  Don't just get caught up with the rate.
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  Make sure you are taking everything into account.
• 11:24
  Yeah, definitely. And you want to see, I guess
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  usually like the total cost over the run.
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  You know, some people just look at that monthly amount and
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  think, oh, that's brilliant. But I think sometimes it's
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  better to look at like the entire situation because like
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  you say, there are so many things that go into go into
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  mortgages. OK then, Joe tip #5. 5 is then
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  considering overpayments. So again, warning here, look
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  carefully at your mortgage terms and conditions and your mortgage
• 11:53
  offer and see what you can do. But if you think that your next
• 11:56
  product is going to be more expensive than your current one,
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  consider overpaying because 1 you can maybe make a big bigger
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  dent in that mortgage now who you might get yourself a bit
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  more used to what your payments going to become and making sure
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  that's going to work for you from a budgeting point of view.
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  But thirdly, you know, if you're also on the cusp of a different
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  loan to value banding, paying down that mortgage and getting
• 12:21
  under, you know, the next rate could bring in a lower cost
• 12:25
  mortgage for you at renewal. So consider those overpayments.
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  If you're in a fortunate position whereby A you have that
• 12:31
  capability within your mortgage and B you can afford to do so,
• 12:36
  you know, weigh it up against some wider investment advice
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  around other areas, but it may well be worth considering.
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  Definitely, yeah, because a, you know, 65% loan to value, you're
• 12:46
  probably going to get a much better rate than a 75% or an 80%
• 12:50
  loan to value. And this was actually something
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  you mentioned to me when we were talking about a couple of my
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  mortgages. And it just makes complete
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  sense. It can, it can save you a lot
• 12:59
  in, in the long run. It might be a couple of £1000 to
• 13:02
  get it below that, below that loan to value, but it's going to
• 13:05
  really pay dividends in the long run.
• 13:09
  All right then, Joe. So give us the lowdown on Triple
• 13:11
  H mortgages and where people can find out more info.
• 13:14
  Sure. So Triple H stands for House and
• 13:16
  Holiday Home. We're a holiday let mortgage
• 13:18
  specialists. You can find us at
• 13:20
  hhhmortgages.com. All our contact information is
• 13:24
  on there and we'll speak to anyone and see if we.
• 13:26
  Can help. Fantastic.
• 13:28
  And we'll put all your details and links in the show notes.
• 13:31
  Joe. It's been a real pleasure as
• 13:32
  ever. Thanks for joining us on host
• 13:34
  Planet Bite Size. Thanks, James.
• 13:36
  All right, let's make this practical.
• 13:38
  Are you currently on a fixed rate or variable rate holiday
• 13:42
  let mortgage? And more importantly, when is
• 13:44
  your next remortgage due? Drop it in the comments.
• 13:47
  I'd be really interested to see where everyone's at.
• 13:51
  If you get your mortgage strategy right, you protect your
• 13:54
  cash flow, you reduce risk and you give yourself room to grow
• 13:58
  even in a tougher market. If you get it wrong, it can hold
• 14:02
  your entire business back. If this episode helped you hit
• 14:06
  like and subscribe for more insights to help you build a
• 14:09
  smarter, more profitable short term rental business.
• 14:13
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• 14:16
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• 14:19
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• 14:22
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• 14:25
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