Buy to let update! What’s the latest mortgage news

Buy to let update! What’s the latest mortgage news

Purchasing a property on a buy-to-let basis, once the hottest trend in the housing market, is currently undergoing something of a resurgence. With interest rates on savings at historically low levels and the stock market far from stable, those with enough money to meet the large deposits necessary for a mortgage can make an excellent return on such an investment.

The market is also benefiting from low mortgage rates, lower house prices in general and a steady rise in rental income. The level of mortgage lending peaked in 2007 at £326 billion and at the time, buy to let mortgages accounted for more than 12 per cent of that total.

The market then declined rapidly with many lenders withdrawing from the market, stifling further growth even among those entrepreneurs who had all but the most sizeable property portfolios. By 2009, buy to let lending accounted for just 5.9 per cent of the total property market.

Having bottomed out, confidence in the buy to let market now seems to be returning with the sector accounting for 11.5 per cent of the market in 2012 and further growth expected. Although there are no government schemes in place specifically to encourage the buy to let market, the Funding for Lending Scheme was launched in the summer of 2012. It offers loans worth £80 billion to banks at extremely low rates of interest (typically a quarter or one per cent), increasing mortgage availability for all, but particularly those looking to buy a property to rent out.

The rise in the number of buy to let properties has been accompanied by a parallel rise in the number of let to buy homes. These are when owners opt to rent out their main residence and then buy a new place to live. For those than can afford it, this strategy allows them to move without having to worry about delays selling their existing property and can also avoid capital gains tax.

Some home owners are taking out traditional buy to let mortgages in order to accomplish this whilst others simply inform their mortgage lenders of their plans and continue with a standard mortgage. This means the actual number of buy to let properties in existence is higher than the number of buy-to-let mortgages known to the Council for Mortgage Lenders and means the market is even healthier than official figures suggest.

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