May 26, 2009
Buy To Let Mortgages Survive
The best buy-to-let mortgages have become much tougher to get following the credit crunch, but deals still exist.
Buy-to-let has become big business in Britain. The decade-long property boom, from 1997 to 2007, with its easy finance and rapidly rising house prices saw buying a property to rent out soar in popularity, turning from a niche activity to one an estimated one million Britons are invested in.
As buy-to-let boomed, financing deals became increasingly easy. Traditionally loans had required at least a 25% deposit and rent to mortgage interest cover of at least 125%.
However, with house prices on the up, demand rising and competition intensive in the buy-to-let mortgage market, lenders relaxed criteria, asking for smaller deposits, rent to interest cover as low as 100% and even basing mortgage offers on borrowers own personal income.
Interest rates on buy-to-let mortgages even became broadly comparable with those on residential loans.
The arrival of the credit crunch in summer 2007, pulled the plug on the party and buy-to-let mortgages are now much harder to obtain. Research by financial comparison service Moneysupermarket has shown a 95% decline in the availability of buy-to-let mortgages between September 2007 and May 2009.
Rates are now considerably higher than residential mortgages, larger deposits are required and lenders are much more choosy about who they lend to.
But buy-to-let survives, there are still mortgage deals out there and a 22% fall in house prices in May 2009 from their August 2007 peak (Halifax) has left investors saying some properties looking a decent investment prospect.
Source: landlordexpert
