Optimism pervades buy-to-let

The Council of Mortgage Lenders (CML) is suggesting that taking out an interest-only mortgage can be a sound decision for landlords, as this type of mortgage will reduce borrowing costs for investors who do not want outright ownership of a property.

According to the CML, 171,800 new buy-to-let mortgages, totalling £21.2 billion, were approved in the six months to the end of June 2007.

Buy-to-let mortgage lending currently accounts for 10% of mortgage balances, compared with 3% in 2002 and despite the five base rate increases since last summer, there is evidence that the buy-to-let sector remains confident.

Mortgage broker, Paragon, has reported that research from an index based on the value of property portfolios now and the expected value of them in 12 months time shows that investors have renewed faith. The index stands at 160, up from 150 in summer 2006.

According to Paragon a slowing property market leaves buy-to-let investors in a strong position; in February 2007 landlords were making an average yield of 6.1% on their rented property and the figure has now risen to 6.3%.

Some potential first-time buyers are remaining in rented accommodation in the belief that the property market has peaked and the growth in numbers of both students and immigrant workers is increasing the demand for rented property.

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