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Buy-to-let less profitable but still popular
August 26, 2007 on 1:20 pm | In News |Investors are continuing to plough money into the buy-to-let market, despite fears that rising interest rates have made the sector un-sustainable.
By Jim Pickard, FT Commercial Property Correspondent - August 25 2007
Five increases in the cost of borrowing since last summer mean that the rent on a typical property no longer covers its mortgage costs, unless the buyer puts down a huge deposit - full article
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Some BTL mortgage lenders such as BM solutions are offering rates discounted to 5.5% for two years. Rental yields on flats of 6% can be achieved. This makes 100% borrowing viable as is the case when borrowers such as myself raise deposits using draw downs on other properties they own to expand their portfolio. At the end of the two year discounted period the mortgage increases by 2%. However it’s possible to renegotiate a lower rate with the lender at that point as there is no tie in. Hence it’s not always necessary to put down huge deposits to reach ‘break even’ as the article seems to be saying. Though this is somewhat dependant on area of course. The 6% yield I refer to is for the area I live & invest in, namely Southampton.
Comment by Robin Pearce — 27/8/2007 #