Buy to Let Mortgages

Buy to Let Mortgages in 2012

Posted on 13/01/2012

Buy to Let continues to be the shining light in what is still a challenging economic environment.  However with lenders both new and old increasing their appetite for buy to let in 2012, the availability of competitive products at increasingly higher LTVs should ensure the choice of BTL funding is good.  This will be the catalyst for Buy to Let investors to increase their portfolios with more confidence.  Also, with static house prices there will be more accidental landlords who choose to let their property out to buy another property to live in, holding on to their existing property until house prices improve.  With this in mind, rents are likely to continue to rise this year although slower than in 2011, which saw large rises.  This is due to the fundamental economics of supply and demand.  There are still 5 or 6 tenants chasing every tenancy agreement.  This in turn means that yields will creep up as rent rise and house prices stay flat.  On the other hand, rental arrears are on the rise and this needs to be managed to ensure that void periods and missed payments do not change a profitable investment to a loss making investment.  Getting a good rent guarantee in place can help with this and ensuring thorough references and due diligence on tenants is conducted before accepting them into your property.  A buy to let property investment is only as good as the tenants and their ability to maintain their rents so ensuring that a good quality paying tenant is in place is imperative.

There are a number of options for first time landlords, and as lenders start to relax their criteria, this is improving.  However, current lending criteria still favours small to medium sized landlords of 1 to 10 properties.  Smaller landlords have more options at the moment (1 to 10 properties).  Where there is a void of lenders at the moment is for landlords with in excess of 10 properties.  Arguably those large landlords who have the survived the credit crunch and their portfolios are now flourishing should be given more favourable rates since they are experts in the area and run their portfolios like a business.

It is more tax efficient to gear up on your property investment and makes your own money work harder for you.  Nevertheless, with property prices being static, caution should be taken when leveraging beyond 75% unless they are obtain a significantly good price.  This is mainly due to the fact that at sub 75% LTV the products are competitive enough to ensure a good cash flow for the landlord.  In the current climate cash is KING.

The London and South East continue to outperform much of the country with regards to investment.  House prices are generally higher than anywhere else in the UK and with the pending Olympics games bringing increased tourism into the Capital, you can expect rents to perform well in this area.  We do, however, expect property prices will remain relatively flat this year, which is testament to the overall resilience of the housing market given the economic challenges the country has faced over the last 3 -4 years. 

With interest rates low and volatility in the stock market, investing in bricks and mortar remains a good long term investment.  A tangible asset that you can add value to, and thus have greater control in impacting on the value.  With other investments you have no control.