Buy To Let Mortgages Boom Time Returns

Buy to​ Let Mortgages. Boom Time Returns.
After last years crisis of​ confidence the​ buytolet market is​ again booming. Earlier worries that interest rates were on​ the​ up and property values would crash are firmly behind us. So,​ fuelled by rising rental yields confidence,​ landlords have been snapping up new properties and remortgaging for cheaper deals.
In the​ final three months of​ last year,​ rental incomes increased by an average of​ 3. 3%. at​ the​ same time the​ rental yield,​ income as​ a​ percentage of​ the​ propertys value,​ edged up from 6. 42% to​ 6. 45%. the​ latest report from the​ Council of​ Mortgage Lenders CML also shows that the​ value of​ new buytolet mortgages increase by 47% in​ the​ second half of​ 2018 over the​ preceding six months whilst the​ number of​ these mortgages rose by 39%.
Indeed,​ we expect the​ boom to​ extend throughout 2018. it​ will be powered by the​ steady increases in​ house prices,​ a​ healthy demand from tenants,​ especially the​ first time buyers who remain priced out off the​ property ladder and a​ glut of​ cheaper buy to​ let deals.
Mortgage lenders are happy as​ well! Industry figures show that buytolet mortgages are now a​ safer bet for them than homeowner mortgages. According to​ the​ CML,​ percentage of​ arrears in​ buytolet mortgage is​ now lower than that for homeowner mortgages and the​ arrears trend for buytolet is​ improving whist for homeowners its getting worse.
Not surprisingly,​ the​ mortgage lenders have responded by relaxing some of​ their lending criteria and aggressively promoting buytolet again.
In the​ past,​ buytolet lenders have required monthly rental income to​ exceed mortgage payments by 30% so if​ a​ mortgage was costing £750 per month,​ the​ rental income needed to​ exceed £975. But now several lenders have relaxed this criteria. the​ reasons not just the​ improved risk profile. Over the​ last six or​ seven years,​ house prices have risen faster than rental income yields,​ making it​ increasingly difficult for landlords to​ meet the​ +30% criteria. So now the​ lending average is​ closer to​ +25% although Northern Rock and a​ few others are happy to​ lend where the​ income simply equals the​ mortgage payment.
Simultaneously we have seen a​ trend for lenders to​ increase the​ percentage of​ the​ propertys value they will lend on. Whilst 75% used to​ be the​ maximum level,​ the​ average is​ now closer to​ 85% with Northern Rock lending up to​ 87% and GMAC being prepared to​ stretch to​ 89%.
Interest rates on​ buytolet have also fallen. 4. 75% is​ available from the​ Mortgage Trust on​ a​ threeyear fix whilst 4. 79% is​ available from the​ West Bromwich Building Society fixed for a​ two years. Both these deals incur a​ 1. 5% arrangement fee. on​ the​ West Bromwich deal,​ when you​ recalculate the​ interest rate and include the​ arrangement fee amortised over two years,​ the​ equivalent rate rises to​ 5. 54%.
Arrangement fees should not necessarily be a​ problem for landlords whose prime concern is​ cash flow. For these landlords it​ can be worth paying a​ large fee to​ obtain a​ low headline interest rate. Thats because the​ rental income/mortgage payment calculation is​ based on​ the​ headline interest rate and this reduces the​ rental that has to​ be charged in​ order to​ meet the​ lenders income criteria.
If youre interested in​ joining the​ buytolet boom,​ remember to​ do your homework. Carefully research the​ local rental market look at​ the​ rentals being achieved,​ the​ trends in​ property prices and levels of​ vacant to​ let properties.
And be especially careful especially if​ youre considering a​ city centre. Some lenders are becoming concerned at​ the​ potential oversupply of​ new flats and apartments in​ city centres they believe are becoming overpriced. Developers are responding by offering tempting cash back and discount schemes rather than reducing prices. But this can sometimes serves to​ mask the​ problem of​ over pricing. Realising this for some cities,​ lenders are reducing the​ value to​ lending ratio back to​ 75%.
Also remember that its important to​ budget for the​ inevitable periods when the​ property is​ empty. in​ an essentially demand and supply market,​ if​ the​ rental market in​ your area becomes oversupplied you​ could be hit by lengthy vacancies or​ be forced to​ reduce your rental prices.

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