Amateur landlords
Can they still make money in the current climate?

The Council of Mortgage Lenders says that there are about 900,000 private landlords in the UK, with £95 billion of outstanding mortgage debt. Attracted by rising house prices and high rents these two key factors have encouraged almost one million Britons to start their own buy-to-let property empires. So what does the future hold? Interest rate rises, possible tax rule changes, more expensive and increased regulation, can a property investment still really make money?

Industry experts say that there is still good money to be made from the buy-to-let market, with the biggest challenge coming from rising interest rates. For the investor there are still plenty of solid arguments in favour of taking out a buy-to-let mortgage. A dwindling supply of new homes has fed a 20 per cent rise in rents in two years, while the latest survey by Nationwide found that house prices have yet to cool after the numerous interest rate rises.

The mortgage price war over the past year or so has been more aggressive in the buy-to-let market. It has got to the point where the best buy-to-let mortgages are in line with mainstream rates. With so much competition on rates, lenders have looked at other ways to encourage borrowers. One is to cut the amount of “rental cover” the borrower needs. This is the expected rental income compared with the cost of the mortgage repayments. Borrowers have generally required rental cover of up to 150 per cent, but most deals are now on offer for 100 per cent cover. The key thing that borrowers need to address is that they require additional resources, such as savings, if their rental cover is only 100 per cent.

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This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Your home may be repossessed if you do not keep up repayments on your mortgage.

Article date: 09.07