Coupled with the huge gap between income and house prices, would-be home buyers are required to come up with a minimum deposit of 25% to secure a mortgage, which amounts to almost £60,000 on the average-priced home of £236,518.
As a result, the mortgage market has continued to slow, with buy-to-let the only segment showing growth.
“The availability and rates of buy-to-let mortgages have steadily improved over the last year, encouraging much-needed investment in this sector,” says Leaders’ managing director, Paul Weller. “More quality flats and houses are required to satisfy rental demand as a greater number of people and families rely on the private rented sector for their housing needs. Overall, conditions are very favourable for landlords, who are understandably attracted by rising rents, consistently strong demand and the good yields that are achievable compared with other investments.”
Many landlords – whether they have just one property or a large portfolio - see buy-to-let as an appealing alternative to investing in the volatile stock market, paying into a pension or into savings which are suffering from low interest rates.
Andy Young, chief executive at Leaders Mortgages, comments:
“Purchasing buy-to-let property is seen by most landlords as a medium to long term investment, providing good returns, not only from monthly rental income, but from the profit gained when the property is eventually sold in the future. With stagnant house prices, now could be a great time for landlords to invest in buy-to-let property.
The buy-to-let mortgage market is also in very good shape with a wide range of lenders and mortgages to choose from. There is a wide choice of buy-to-let mortgages available for first-time landlords with most of the key lenders offering products to new investors. Leaders Mortgages currently has around 400 buy-to-let products available at any given time via its website.”
Whilst the majority of buy-to-let properties are owned by professional landlords, there has been an increase in the number of ‘accidental landlords’ entering the market, including home owners wanting to move but unable to sell in the current housing market.
Unfortunately many home owners are finding themselves trapped as they are unable to sell their property,” explains Paul. ”Letting rather than selling their home is often the perfect solution as it not only enables them to move home when they are ready, but also provides a useful income and allows them to retain their asset until the sales market becomes stronger.”
Leaders’ advice for all prospective landlords is to seek impartial guidance and be realistic. As with any investment there are negatives as well as positives, but many of the negatives can be avoided with the right planning, research and advice. “For example,” says Paul, “problems can be minimised by choosing the right property type in the right location for the right price; securing the right financing for your property purchase; planning for any periods when your property may be empty; calculating your potential yields correctly; and viewing your property investment as a medium to long term proposition.”
