At the moment it is easy to lull yourself into believing you can afford the mortgage you need – mortgage rates are at all-time lows and feel easily affordable. However, you need to ask yourself not only can you afford it today but can you afford it in the future when mortgage rates return to more normal levels.
Let’s say you manage to find a buy-to-let mortgage with an interest rate of three percent, fixed for three years. That’s a great rate. After three years you find interest rates have gone up and the best deal you can now get is six percent.
That’s an increase of three percentage points but, more frighteningly, your interest rate has increased by 100%. Will your net take home pay have increased at the same rate?
Interest rates will go up sooner or later. So be sure you can afford your mortgage repayments when that happens, not just now.