Good News for Buy to Let Landlords

by Mark Johnston

Rents took a real beating during the credit crunch and subsequent recession. Rents have dropped 6% from 2008 to the start of this year but Landlords are seeing a strong bounce back.

Average rents have been climbing since the start of 2010 and are set to carry on rising. The strong performance may well be down to few companies agreeing buy to let mortgages and few first time buyers securing new loans. This has created a market where there is a lot of demand and less competition. Demand for rentals will continue to be strong whilst ever there is little credit in the mortgage market. Lenders have reduced the number of first time mortgages they agree but demand is still high so the private rental market is bridging the gap.

Southampton has seen the biggest rise of 7%, whilst Newcastle has fallen over 9%. Other cities like Birmingham (2%), Liverpool (3.6%), and Bristol (5.2%) have seen very positive rises.

While rents are continuing to rise, first time investors are being tempted back into the market only to find very few but expensive deals.

Buy to let mortgages were introduced into the market to stimulate growth in the rental market by allowing private investors to purchase property that could then by rented out. Many mortgages were offered on the rental income that a property could raise rather than the amount of income the individual investor had.

Buy to let mortgages are still very hard to come by but some lenders are beginning to show confidence. decided to take a look at some of the best buyers out this month.

Loughborough Building Society is offering a discount short term 2 year mortgage at 4.24% with an APR of 5.1%. Maximum loan to value (LTV) is 70% with a fee of £9,999.

Coventry Building Society has a variable mortgage at 4.8% with a slightly better ARP of 5% when compared to the Loughborough deal. Loan to value is 60% so you’ll need a 40% deposit and the deposit is £1249.

Coventry Building Society is offering a 4.75% mortgage with a fee of £1249. This is a 2 year fixed rate which reverts to a standard rate after the two year period. APR is 5% and the loan to value (LTV) is 60% making it a very competitive option as long as you have the 40% deposit.

Natwest tops the tables with their market leadings buy to let tracker mortgage at 4.99% , APR for comparison is 4.9%. Natwest is charging £1999 for the deal and is offering it with a maximum loan to value (LTV) of 75%. Remember that the rate is variable so it can go up as well as down.

A £200,000 property would require a £80,000 deposit. If you can find the 40% deposit the mortgage at 4.99% over a typical 25 years would set you back around £1168 for a capital and interest mortgage or £831 for interest only.

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