BTL mortgages – some good reasons why now is a great time to fix!

November 5, 2015

There was good news today for landlords and property investors, as the Bank of England once again announced that it would be holding the base rate at 0.5%.

Indeed, they have signalled that this rate may be held well into 2017!

In its quarterly Inflation Report, the bank said even if U.K. interest rates did not rise until early 2017, CPI inflation would barely rise above its 2% target – an indication that it was in no hurry to raise the cost of borrowing.

The forecasts suggest that, contrary to Governor Mark Carney’s recent suggestion that the decision to raise rates would come into focus in early 2016, it may only come into sight at the turn of the following year.

This news, combined with greater competition in BTL mortgage market, means it’s a good time for landlords to consider opting for a fixed rate mortgage.

Additionally, the Chancellor, George Osborne, has indicated that there will be a tightening of regulation within the BTL mortgage sector.  This is partly due to concerns about increasing house prices, driven by the popularity and success of BTL, but also partly by directives from the European Union.

Interestingly, in 2000, buy-to-let accounted for 4% of mortgage lending, by the second quarter of 2015 this had risen to 16%.

Lenders are battling to win business and so-called “challenger” banks  are also targeting the BTL market, with new products and more flexible criteria for lending, meaning that landlords have a great deal of choice.

According to Paragon, experienced buy-to-let landlords are optimistic.  It found that 89% of those it surveyed expected stable or growing demand from tenants over the next year.

A big factor in landlord optimism is the supply/demand imbalance that looks set to continue.

The latest household projections suggest that we need over 220,000 additional homes in England each year until 2031 if the projected growth in households is to be accommodated.

Currently we are building only 54% of the forecasted house numbers needed – putting upward pressure on prices and rents.

This problem is significantly worse in London and the South East where demand is higher, and there is a lack of land for new development.

Eric Walker, M.D. of Northwood, commented:

“Savvy landlords will be continuing to purchase in areas of high tenant demand where there is a strong owner/occupier demand as well.

They will take professional advice from an FCA regulated mortgage broker to help them build their portfolio efficiently, using the most suitable financial products to achieve their goals.

They will also be factoring an interest rate rise into their calculations as rates will rise eventually, and they must ensure their margins can cope with this”.

Read our Checklist for financing a BTL property

Remember to check out our Investor List for properties suited to investment, some with tenants in situ which means a rental income is achieved from Day 1. Even better a number of properties are on the Northwood Guaranteed Rent service which means that their rental income is guaranteed each and every month on an ongoing basis.

We also have a Buyers Guide for those interested in investing in a Buy to Let property.

Northwood is one of the largest and most recognised lettings agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

Find us on Twitter @northwoodUK or visit our YouTube Channel.





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