As the shoots of recovery start to show in the Economy and the recent Government backed mortgage schemes have helped people get onto the property ladder, the Buy To Let (BTL) Market is also in a period of recovery.
House prices are increasing, rental returns have not dropped but increased and more lenders are increasing the flexibility of their products. With interest rates still low, BTL mortgage rates are attractive and there is a growing number of buy-to-let loans becoming available.
Data from analyst firm Moneyfacts shows that in August 2009 the typical two-year fixed buy-to-let mortgage rate was 6.01 per cent, falling to 5.58 per cent in August 2010, 4.08 per cent in August 2013 and 3.78 per cent in August this year.
The demand for buy-to-let remains strong and if you take into account the impending changes in the Retirement market, with more flexibility given on how you can take your Pension Funds from next year, it could get stronger as people opt to use available pension fund cash to purchase property
The Telegraph last weekend ran an article- DIY Pensions- about increasing investment choices for retirees, where as opposed to purchasing an annuity, the option to purchase a Buy To let property, to provide you a with a Retirement Income was one of these DIY choices-some may say a cost and time laden choice-but a choice all the same and you can expect a lot more of that from the media over the coming months.
With poor returns on cash and stock market volatility and with an attitude change to renting as opposed- some would say a forced attitude- over buying, the demand and interest for BTL is growing again!
With house prices rising – rapidly in some areas – the appeal to investors has only strengthened. Although the income that a good buy-to-let investment could generate has been very attractive in recent years, the potential for more significant capital growth will only serve to bring more to the market.
Council of Mortgage Lenders statistics show the market is growing, with lending up 5 per cent over the month to June to £2.2bn, although the number of loans approved was the same as May at 15,600, with the disparity most probably attributable to higher house prices.
Nevertheless, the CML points out that growth was strong compared with June last year – 38 per cent up by value and 23 per cent by number. Buy-to-let lending in the second quarter of 2014 increased slightly on the previous three months but, more substantially, in comparison with the same period last year.
We have seen an increase over the past year in BTL applications and enquiries have increased significantly and although property prices have not increased as much as ‘south of the Watford Gap’, Landlords are looking at buying on an upward curve and there are good returns available.
According to Nationwide Building Society prices are up 10.6 per cent over the year to the end of July
Most Landlords will remember the crash in property values in recent times and of course whilst they will always want to make hay whilst the sun shines, the risks are now more tangible and understood-negative equity is common, especially on new developments where some were shown to be overpriced and overvalued.
So caution is the watchword and not to get sucked into the hype that sometimes exists around the media in the interest of a good story-BTL can be a great route, but always ask yourself, why am I considering this and what are the alternatives.
