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The Impact of Investment Property Interest Rates in 2023

The Impact of Investment Property Interest Rates in 2023 | Knight Knox

The impact of investment property interest rates in 2023 is likely to be significant, due to interest rates being a critical factor in determining the overall profitability of any investment property. When low, investors can borrow at a cheaper rate, making it easier to finance a property and guarantee better returns on their investment.

When interest rates are high, however, the cost of borrowing money increases, potentially making it more difficult for investors to generate positive returns. In 2023, the interest rates on investment properties will be influenced by numerous factors, including the level of demand for investment properties and especially the overall health of the economy.

Rising inflation

If the economy improves and investors see a demand for properties, interest rates are likely to remain low. But with inflation still brewing, the economy may still be in for a bumpy road ahead. As of November 2022, the Bank of England increased the interest rate from 2.25% to 3%, a 0.75% increase.

Despite the potential challenges, there are also opportunities for investors who can adapt to the ever-changing market conditions. For example, investors who secure financing at a fixed rate, rather than a variable interest rate, may be able to avoid some of the negative effects of rising interest rates.

Likewise, investors who can identify properties that have strong potential for appreciation and rental income may be able to generate a positive return on their investment, even in a challenging economic environment.

Property prices

According to a recent article by, Hina Bhudia, Partner at Knight Frank, stated: ‘’On a monthly basis, UK house prices have just started to soften, but each market and property type is going to fare differently. Our forecasts suggest UK house prices will fall 5% in 2023 and again in 2024 before returning to growth.’’

While property prices adjust to world changes, prices are expected to rise in the long run, with experts expecting a 2% increase in 2024 and 4% in 2026. So while demand and supply for purchasing properties are relatively low, tenants looking to rent are on the up, and more than happy to pay good money for a high-quality home, making buy-to-let investments open to impressive profits in 2023.

Locations to watch out for

As data continues to highlight opportunities despite the downfalls, buy-to-let investors, especially those who are experienced, should take advantage of the UK property market in 2023 and focus on key areas to get the best results.

Birmingham and Manchester are some of the best areas to invest in buy-to-let properties in 2023, due to high rental demand and incredibly affordable property prices, as well as Leeds and Liverpool. In 2023, the north is the place to set your sights on if you want to overcome market challenges.

Working with the impact

Overall, the impact of investment property interest rates in 2023 will encourage investors to carefully consider the potential risks and opportunities associated with the changing market conditions. By staying informed and being proactive, investors can position themselves to capitalise on the available opportunities and mitigate the risks associated with higher interest rates.

Talk to Knight Knox

At Knight Knox, research has shown that Northern cities continue to prove their economic worth and show why investors are moving away from the capital in favour of cities like Manchester, Liverpool, and Sheffield, especially when the market seems uncertain. Get in touch with us today to learn more about investment opportunities.