For buy to let investors with good credit, there are
many mortgages available, and far more choice than
at the start of the credit crunch – offering
investors mortgages at rates of around 4%. This cheap
borrowing, for those with 25% deposits, and good credit,
makes the net income available, even stronger. Lender's
eagerness to do business with landlords is reflected
in a range of attractive new deals and a trend of
falling rates and fees.
Virgin Money last week trimmed its two-year fixed
rate from 3.99 per cent to 3.79 per cent for landlords
with a minimum 40 per cent deposit. There is a £1,995
fee. And Manchester Building Society raised eyebrows
by unveiling rates that can be fixed for as long as
25 years. Borrowers need a minimum 25 per cent deposit
and must pay a £749 fee. After that they can
choose either a capital repayment mortgage at 5.74
per cent, or interest-only at 5.99 per cent. David
Hollingworth of mortgage broker London & Country
says innovative products such as this illustrate that
‘life is being breathed back into the landlord
sector’. Hollingworth says that the proportion
of landlord business that the firm does is back at
the level of 2007, before the start of the banking
As an example, one of our clients recently bought
in Manchester at £70,000.
put down 25% deposit ie £17,500, and with fees
all in for around £20,000.
mortgage was just £52,500 – and at 4.99%
was just £218 pcm interest payments. At rent
of £550, even after costs he was getting around
£220 net income per month, or £2640 per
year. So based on £20,000 cash invested, he
is getting 13% return on his investment.
we negotiated a £15,000 discount from list price
when he bought – so as you can imagine he was
very pleased compared with the 1.75% return he was
getting in a so called savings account.
So in summary – as was highlighted in our Annual
UK Property Review – which can be downloaded
here (PDF) – the excellent combination of limited
new housing, allied to the rapidly growing population
and continued rationing of mortgage funds for first-time
buyers, has been a key factor behind the relentless
upward trend in rental returns for buy to let investors.
UHY Hacker Young confirm this. They stated this week,
this is due to the poor returns on investments elsewhere.
This explains the phenomenal growth in the number
of taxpayers declaring an income from property, which
has risen from 1.4?million in 2006-07 to 2 million.
Roy Maugham, a partner at UHY Hacker Young, says:
‘When the financial crisis began, people wrote
off buy-to-let, saying it was the end. It was anything
but. Despite the risk of volatility in house prices,
rents provide a steady income that other investments
can’t currently match.’
if you have wanted to take the next step for some
time this is the time!