Over the past year, buy-to let investments have proven immensely lucrative thanks to a combination of factors in the housing and mortgage markets. Even despite the implementation of more stringent lending rules in April of this year and the Bank of England’s recent confirmation that the base rate is set to increase as early as spring 2015, landlords have maintained a healthy position in terms of borrowing and annual returns.
Record rents and house prices
According to a study released by LSL Property Services, rents are now at an all-time high in Wales and England, where the past year has seen a 2.4 per cent increase in rents across the board, surpassing the October 2013 record. In the South West, house prices showed the highest increase at 3.5 per cent, closely followed by the South East, where prices increased by 3.4 per cent.
With the rapid rise in house and rent prices, landlords have greatly benefitted from their property investments. Not including deductions for tax, maintenance costs and mortgage repayments, the combined spike in rents and house prices has given buy-to-let investors a gross average return of 12.7 per cent in the past year; generally, this translates to impressive returns of £8,233 in rent and £13,066 in capital gain.
The right time for buy-to-let borrowing
In addition to the rise in rent and house prices, 2014 has also presented prospective buy-to-let investors with prime borrowing opportunities. With falling swap rates (the interest rates lenders use to set loan prices), September ushered in a vicious mortgage price war among leading lenders, with rates slashed to near-record lows and an abundance of excellent longer-term fixed rate mortgages becoming available.
Even the new lending regulations that came into force in April have had little impact on buy-to-let borrowers, whose applications remain unregulated, making it far easier for them to secure a loan than it is for dwellers. The intense competitiveness of the market is also to landlords’ advantage, giving them lots of scope to select the best possible package with the right guidance.
Prudence remains essential
Although buy-to-let investors do have a strong position in the housing and rental markets, would-be landlords should not become too starry-eyed in the face of so many competitive rates. While the mortgage price war has led to brilliant opportunities for investors, the world of mortgages still requires skilful navigation; for example, eager borrowers may overlook the steep fees that often accompany the lower rates of buy-to-let mortgages.
At Homeline Mortgages, our priority is providing accurate, frank mortgage advice. By staying abreast of all the latest developments in global and national markets, we are able to offer unbiased and fully confidential guidance to anyone interested in securing a loan, be it a mortgage, remortgage or equity release loan.
For more information on our straight-talking mortgage advice services, contact us at Homeline Mortgages today.