The Buy to Let market has seen a gradual comeback since the beginning of the year with lenders looking to lend in this area once again. More lenders and subsequently more products have become available and with the margins available on buy to let products it is no surprise that lenders wish to have some foot in this market.
We will not see a return to previous times where rates almost mirrored residential rates and loan to values were available up to 90% but compared to other investments there is still the potential for a return on property investment.
It is two years since the Bank of England base rate fell to 0.5% in March 2009 and in the two years since to March 2011 the average price of property in Oxfordshire has grown by just under 10% (source Land Registry).
With the size of deposits now required to purchase property many first time buyers are unable to purchase a home without support and this has had a knock on effect with a very strong rental market with very sustainable rental yields. Many parents of University students now look to purchase a home for their son/daughter and let the other rooms as this is a viable financial outlay with the potential for capital growth as well.
Mortgage rates are available from 4% upwards for a two year fixed rate and from nearly 1% lower for variable rates over 2 years and this makes most investment mortgages self financing. The offers will depend upon the size of deposit available and the potential rental yield for the property. The more attractive deals are available with 35% deposit or more and although it is possible to obtain an investment mortgage with a 15% deposit, the likelihood of the rental yield fulfilling that criteria is very low. Lenders also front load some of the more attractive deals with fairly high product fees and each will have their own individual criteria.
However the availability of deals and the potential return in either yield or growth still makes property purchases a very viable investment for those with the deposits available.
It is important that those wishing to invest in property should seek the advice of an independent Adviser or Broker as what may appear to be the best deal on the surface may prove not to be over the investment term.
Simon Sharpe is a Partner in John Charcol Associates and is contactable on 0207 933 9737 or email Simon.Sharpe@johncharcol.co.uk