Buying to Let
The credit crunch has impacted on every sector of the UK property market in 2008 and the buy-to-let (BTL) market is no exception.
The Council of Mortgage Lenders reports that the number of new BTL mortgages written in the first quarter of 2008 compared to the same period last year is down by 8 per cent. Price comparison website moneysupermarket.com finds that the number of BTL mortgage products which are now on the market is only 307, compared to 4,384 last year. But there is some good news too for would be landlords.
Lenders are reducing mortgage rates and the upshot is it makes borrowing more affordable – for example on a £200,000 BTL mortgage half a percentage point fall equates to a saving of around £100 per month. This is an ideal scenario for BTL investors, particularly when it is allied with slowing house prices because the yield (rental income as a percentage of purchase price) is likely to be higher. The knock-on effect of the tougher lending climate – and a further bonus for BTL purchasers – is that there are more potential tenants in the marketplace because they aren’t able to borrow so easily.
Investors, therefore, with liquidity (ready cash) and a good credit history are now extremely well positioned to take advantage of the reduced BTL mortgage rates and weaker house prices to grab themselves a bargain. The extremely shrewd ones will look at the offers housebuilders are promoting on new homes, such as paying buyers’ stamp duty on their behalf or legal fees and moving costs.
Neil Young, CEO of Property Portfolio Managers, Young Group, said:
"It's encouraging that some of the largest lenders have reduced the interest rate on BTL mortgages. It shows that they're ‘open for business' and actively seeking new mortgage instructions. This is another indication that the mortgage market is returning to some level of normality, following the industry's clampdown in the wake of last year's credit crunch. It is encouraging to see sense coming back to the market."