Buy-to-let mortgages are on the up again, and the market is looking ( personal loans ) very buoyant. This article looks at whether anything has changed this time around, and what new landlords should be aware of.
Buy to Let Mortgages - they're on the up
The buy-to-let market took a dive last year, but confidence has returned ( insurance ) and the market is doing well again. This time last year, no one knew what would happen with the interest rates, but they have remained steady and fears of a property value crash proved to be unfounded. Consequently, landlords have been buying more properties and remortgaging to get the best deals.
Rental incomes increased, from October to December 2005, by an ( loans ) average of 3.3%
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The boom should last for the duration of 2006 - as long as house prices continue to increase steadily, tenants keep renting, and people are unable to get their first foot on the property ladder, there will be a healthy supply for budding property moguls.
Mortgage lenders are enjoying the buy-to-let boom too. They see these ( home insurance ) mortgages as a better bet than the traditional homeowner mortgages, in fact, based on figures provided by the CML, it would seem that the percentage of arrears in buy-to-let mortgages is beneath that for homeowner mortgages. Also, the arrears on buy-to-let mortgages are lessening while on homeowner mortgages, the arrears are actually growing.
Mortgage lenders, to encourage more buy-to-let mortgages, have changed their previously quite strict attitude to these mortgages, and are now making them much more accessible. They are also actively promoting them.
Traditionally, buy-to-let lenders have demanded that the monthly rental income should be around one third more than the actual mortgage payments. So if a mortgage cost £500 a month, then the rental income would need to be around £700. But the trend, started by a few mainstream lenders, is heading towards relaxing these criteria. It's not just the improving risk situation, it's also a reflection of property prices. House prices have risen quicker than rental income yields over the last six or seven years, making it more difficult for landlords to meet the criteria. The average requirement for rent compared to mortgage is closer to +25% now, but Northern Rock and a few others will provide a buy-to-let mortgage if the monthly rental income simply equals the mortgage payment.
The trend is also meaning increases across the board on the percentage of the property's value lenders are prepared to lend on. In the past, they would lend no more than 75%, but recently, the average has increased to almost 85%. Notably, Northern Rock will lend up to 87% and GMAC have an 89% deal.
Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required.
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