The last few years have been a tough time for many savers and investors. There are barely a handful of savings accounts that keep pace with inflation while the price of gold has plummeted in recent weeks. So, with the Funding for Lending scheme resulting in cheaper mortgages, more people are turning to buy to let property to maximise their medium to long term return.
The Independent reports that it is ‘no surprise, therefore, that property industry data show the number of private landlords is set to top a million in the next couple of years.’ So let’s look at the booming buy to let property mortgage market.
Recent figures from the Council for Mortgage Lenders show that buy to let lending is up 10 per cent on 2011. Many experts attribute this to the wider availability of investment mortgages through the Bank of England’s £80 billion Funding for Lending scheme. “This has had a material impact on lending by improving liquidity generally,” says John Heron, the director of mortgages at specialist lender, Paragon. “It has also put downward pressure on interest rates, which helps first-time investors.”
The second main reason for improved investment returns is the strong demand for rental property. Phil Rickards of specialist buy to let lender BM Solutions says: “We are seeing increasing tenant demand and a shortage of buy to let property. This may be due to first-time buyers opting to rent while saving for a deposit, or families looking to secure school places by renting properties in the catchment area.
“Inward migration is certainly a factor, with 500,000 people coming to the UK each year and few immediately becoming homeowners,” he adds.
Many investors are turning to buy to let property in an attempt to make their capital work harder. “The UK’s largest lettings agent recently reported that the average rental yield is 6.2 per cent per year,” says Islay Robinson, CEO of London mortgage adviser Enness Private Clients.
“This compares extremely favourably to savings accounts, stock market performance and other types of investment and so it’s no surprise that more people are turning to buy to let property. However, the lettings business can be a minefield for a novice investor and so we’d always advise a new landlord to speak to a high value mortgage expert before taking the plunge.”
With dozens of buy to let mortgages to choose from, speaking to a large mortgage broker can help you find the most appropriate deal for you. And then, there are plenty of legal and logistical issues to consider.
“Any landlord has about 70 pieces of legislation to comply with,” says Ian Potter, the managing director of the Association of Residential Lettings Agents (ARLA). “And then there’s managing tenants, handling rental and deposit payments and maintenance. This is a lot for any private investor to manage on their own.”
Your alternative to going it alone is to employ the services of a lettings agent. While these companies can help you with many of the issues associated with letting a property, they can charge up to 15 per cent of your monthly rental income. And, with no regulation in place, it’s important for you to choose an agent carefully.
“Landlords who use ARLA-registered agents have peace of mind knowing that should a tenant not pay, they are protected. It also works for tenants as it guarantees deposits comply with legislation and are held by a third party,” adds Mr Potter.
If you are interested in investing in buy to let property or to expand upon a current buy to let portfolio, feel free to contact one of our expert brokers for more information, or take a look at our buy to let guide below.
France is one of the most popular property markets for foreign nationals: we are all aware of the chic appeal of Paris, the enduring allure of the Riviera in the summer or the freshness of the mountains in winter.
Covering everything from search and negotiation to making an offer and the legal processes, the guide will help you fulfil your dream of property ownership in France.