Buy-to-let
The sector still holds attractions

There are approximately 900,000 private landlords in the UK according to the Council of Mortgage Lenders. The two key factors of rising house prices and good rental incomes have encouraged almost one million Britons to enter the buy-to-let sector. But if we experience future interest rate rises, possible tax rule changes and more expensive and increased regulation, can a property investment still really make money?

A dwindling supply of new homes has fed a 20 per cent rise in rents in two years, while a recent survey by Nationwide found that house prices have remained robust after the numerous interest rate rises.

The mortgage price war over the past year or so has been more aggressive in the buy-to-let market. It has got to the point where the best buy-to-let mortgages are in line with mainstream rates. With so much competition on rates, lenders have looked at other ways to encourage borrowers. One is to cut the amount of ‘rental cover’ the borrower needs. This is the expected rental income compared with the cost of the mortgage repayments. Borrowers have generally required rental cover of up to 150 per cent, but most deals are now on offer for 100 per cent cover. The key fact that borrowers need to address is that, if their rental cover is only 100 per cent, they require additional resources such as savings.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. Any references made to the Pre-Budget Report may be subject to the Finance Bill becoming law.
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