Investors in the buy to let market have not been deterred by the five interest rate rises this year and the trend seems set to continue.
Even the recent volatility in the stock market has not stopped landlords snapping up mortgages. This is despite the fact that the interest rate rises will mean that the monthly cost of rent will not cover the mortgage. Market volatility may help to boost the buy to let mortgage market, with investors trying to safeguard pension investments.
Buy to let mortgages now account for 12% of all new mortgage loans. Landlords took out 171,800 buy-to-let loans in the first half of 2007, raising the total number of such mortgages to 940,000, according to the Council of Mortgage Lenders.
Although landlords might not be covering their monthly costs on their investments, they are relying on capital growth and hoping to make money in the future when their investments are sold. This can be risky and I suspect the buy to let market will slow down at the beginning of next year.
For now, the buy to let market remains buoyant.
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September 19th, 2007 at 12:35 am
Sorry to be blunt, but if the market is buoyant, then that is only because the ill-informed newby is jumping on the band wagon.
There are still good properties out there and profits to be made, but the whole idea of buy property and you’ll make a killing died a couple of years ago!
New investors are taking a gamble and may come out smelling like roses, but unless they do decent research they are more likely to get burned than come out ahead.
I always come back to the question…
“If property A is marketed for 200,000 and a very similar property down the street is marketed for 240,000, is property A a good deal?”
The answer to the newby is yes, I make 40,000 on the initial price so I will buy, but that doesn’t take into account the market. If the market changes and the second property is downgraded to 180,000 after the seller realizes he can’t get 240,000 then the newby has just taken a 20,000 loss.
Property A is only a bargain if it is really worth more than 200,000!
Buyers beware, but don’t stop looking, there are still bargains out there and there always will be, just be informed and do your research! A decent estate agent will help you find them if they are out there, but be patient! The gold rush is over, but you may find a gem!