Buy to Let Mortgages Holding Firm
The essential components for a successful buy to let landlord are becoming clearer now more than ever before. Leading estate agents are noting gross yields on buy to let mortgages reaching on average seven to eight percent after a period of stagnation at around three and a half percent. More people are choosing to rent and since there has always been a corporate rental market the buy to let landlord will remain stable compared to many other investment strategies.
Most landlords put down a higher deposit than those with residential mortgages and just over one percent of all the buy to let mortgages are more than three months in arrears. When you consider this figure alongside the 1.33 percent in the wider mortgage sector it’s easy to see past the hype. More people are looking to rent and with the exception of some inner city apartments that are badly located, most people can relax about the stability of their investment. Buy to let mortgages are geared to the level of loan to value and in most cases landlords are conscious of owing too much to the bank. A recent survey by the Association of Residential Letting Agents (ARLA) has noted that most landlords are geared around fifty to seventy five percent. This means that an unlikely fall of as much as twenty percent would not cause them to be in negative equity and that for most people, things will carry on as usual. The majority of property investors are in for the long haul. The average landlord will keep his property for more than fifteen years and by this time the population of this country will have grown and with that an even greater need for housing and it’s easy to see why.
In America there are vast areas of land and few restrictions on building while the United Kingdom is short of space and more importantly has tightly controlled planning departments. The lack of properties coupled with the credit crunch making things less attractive to large developers means that the demand for housing will keep on increasing. Few banks are willing to lend money for building new apartments but they are still interested in offering loans for home improvements like adding more space though a basement conversion or creating extra rooms in the loft. This shows that in places people really want to live there will be a far smoother transition from the period of readily available credit to one of relative caution.
Investing in property can provide excellent returns over the long term. Keep your property well maintained and try to accommodate tenant requests wherever possible.
Some landlords are currently experiencing cashflow problems as buy to let mortgages are in short supply so there are stuck on unattractive interest rates. The credit crunch has reduced the number of mortgage lenders and also the number of different buy to let mortgage products to choose from. This will ease in time and then landlords will be able to remortgage their investment properties onto more favourable mortgage schemes.
Author Bio: Sean Horton is a Director of Let Property Strategies who offer buy to let mortgages
