Everyone knows that over the past 5 years or so that the returns on savings have been very poor. Borrowers might have benefited from historically low interest rates but saves and investors are suffering. So could now be the time to invest in property? With rental yields high and relatively easy access to buy to let mortgages becoming a landlord could be a good move.
Mortgages are now more readily available, with a much wider choice of options, than at any time in the past 5 years.The amount lent to landlords in the UK reached over £5 billion in a single quarter in 2013, which is a level not seen since before the credit crunch.
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With strong rental demand from tenants coupled with many buy to let mortgages at competitive rates, and a greater willingness on the part of banks to lend to investors, now is a good time to consider property investment.
Many investors are pulling their capital out of savings accounts and other investment vehicles in a bid to get higher returns from property. In the second quarter of 2013 there were 40,000 buy-to-let mortgages agreed in the UK. This revitalisation of the property market, from the perspective of investors, is due to the effect of government schemes helping to lower the interest rates charged by the mainstream banks and other lending institutions. And, of course, rents across the UK remain high because demand is still strong.
For these reasons many property investors, both experienced landlords and first time landlords, are using buy to let mortgages to take advantage of higher returns offered by high rents and low interest rates on their mortgage payments. Interest rates on savings accounts are likely to stay low for the near future so it is understandable that more and more people are seeking an investment with better returns for their capital.
The Council of Mortgage Lender's head of policy, Jackie Bennett, said: "Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages.
The current ease of obtaining a buy to let mortgage at a competitive rate is encouraging existing landlords to remortgage as well as purchase new properties for their portfolios and also it is encouraging aspiring landlords to enter the buy to let market for the first time.
Unfortunately, the downside of this situation is that first time buyers are still finding it difficult to buy their first home because the majority of mainstream banks and building still demand a deposit of around 20 per cent before agreeing a mortgage. With house prices still high in London and the South East 20 per cent of the average property price in these areas is a big chunk of money to save up. However, with the governments Help To Buy scheme that situation is gradually changing. It will be interesting to see what happens to the demand in the rental market as more and more first time buyers enter the market over the coming year.
But with the government's other scheme Funding For Lending contributing to the low rates of buy to let mortgages it seems likely that investors will still reap rewards in the property market as they benefit from exceptionally low interest rates. House prices will start to recover, in fact they already have in some parts of London and the South East, so not only will the cost of a large mortgager main low but there is also the potential for some capital gains on the value of investment property.
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