Buy-to-let rents push higher
Pressure on prices in some parts of the UK has seen renewed interest in buy-to-let (BTL). Should you, then, consider taking the plunge?
Clearly it depends on a spread of factors. Given the economic backdrop and rotten annuity rates, it's not surprising many current BTL landlords feel vindicated that property overall remains a better deal than the vagaries of a stock-market pension, particularly for private sector workers whose pension pay-outs are not guaranteed (unlike the public sector).
"It's also a good market for lenders," says David Hollingworth of London & Country mortgage brokers. "Buy-to-let investors still have to put down a lot of equity. There's usually a minimum 25% deposit to act as a buffer. The products are also good margin with relatively low risk."
Which is why there's been an increasing rash of new buy-to-let deals on the table. Hollingworth suggests taking a look at the Mansfield Building Society's two-year fix at 3.89% rate, with a 70% loan-to-value ratio. The Co-op Bank have also entered the market with their Platform range, offering rates for a two-year fix of 3.69%.
Fee painAmateur landlords need to watch for stinger fees when it comes to deals. The Mansfield Building Society deal comes attached with a £999 fee. And other buy-to-let fees can be significantly higher, with some adding as much as 2.5% onto the deal overall. Like the Co-op's 3.69% two-year fix.
The BTL market remains highly regionalised, warns Hollingworth, and it's not a route that now offers - as it once did - huge amounts of potential for capital growth, certainly at the lower end.
It's more more about income generation. "If you have a situation where rents are going up, that may force people into lower quality rentals because their budgets can't keep pace," adds Hollingworth. So more ballast, then, for the lower end of the BTL market.
Gap widensNot good news for David Cameron however. The Prime Minister recently claimed that private rents were starting to come down due to housing benefit reforms. (He might have been right at the time.)
And for all those would-be homeowners, any news that rents continue to rise makes it that bit harder to save for a deposit, especially when wages nationally remain slow to rise. So the housing gap between those who own and those who rent continues to widen.