Two points on the mortgage and you are losing money
Mortgage Rate Rise Stress Test
Interest is not a deduction, so you feel almost the whole rise. On this portfolio 8.5 per cent turns a profit into a loss with the rent unchanged.
Mortgage Rate Rise Stress Test
What a remortgage does to a landlord whose interest is not a deduction. The rise lands twice.
Why a rate rise hurts more than it used to
Before 2017 a rate rise raised your interest and cut your taxable profit by the same amount, so a higher rate landlord felt sixty per cent of it. Now the interest is not deducted, so you feel almost all of it.
The basic rate reduction is capped at your property profits. As interest rises and profits fall, the reduction stops growing and the unrelieved interest carries forward instead.
That is how a landlord goes from profitable to loss making on a remortgage without the rent moving at all.
Stress test at two points above your current rate before you fix, not after. The lender will.
Take the workbook
Your portfolio at several rates at once, with the rate that wipes out the profit.
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