Landlords unworried by rise in interest rates
Thursday 2nd June 2011
Landlords are increasingly optimistic about the prospects for buy-to-let.
A new ‘landlord sentiment’ survey by LSL Property Services, parent company to Reeds Rains, Your Move and the former Halifax agency offices, says that nearly half (49%) of landlords think it is a good time to invest in more property.
The landlords are also unworried by the prospect of rising interest rates, saying that they would need to rise 3.25% on an average buy-to-let tracker mortgage to exceed current rental income.
Nearly seven in ten landlords (68%) expect rental demand to grow in the next year.
However, 54% are finding mortgage finance harder than a year ago and cite it as their biggest obstacle.
Of those landlords who have bought in the last year, 48% were cash purchasers.
With 185,600 fewer first-time buyers entering the sales market in the last 12 months than in normal years, over half of landlords have seen a rise in tenant demand in just the last three months.
David Newnes, estate agency managing director for LSL, said: “Optimism among landlords is not only buoyant, but increasing. Soaring rents and climbing demand from frustrated first-time buyers are not only making buy-to-let an attractive proposition for new property investors – but are encouraging existing landlords to grow their holdings before property prices increase once more.”
The latest LSL Buy-to-Let Index showed that rents now equal their all-time high of &692 per month.
As a result, landlords with mortgage finance have an average of &274 in rental income a month after mortgage payments – or &3,288 per year.
This means that even if interest rates increase by 3.25%, landlords’ current rental income would be big enough to absorb the increase in the cost of a tracker mortgage on the average buy-to-let property.
Newnes said: “Landlords are taking a healthy sum once the mortgage has been paid each month. Many are taking the opportunity to either pay down their mortgage or expand their portfolio – or are using the opportunity to build slush funds for rainy days or future higher mortgage costs.
“With the Bank Rate forecast to remain below 2% until at least the end of next year, landlords can expect to see rental payments rise without facing the burden of higher mortgage payments.”
Glynis Frew (Director) commented "we are seeing an increase in the number of accidental landlords, who are letting and waiting for selling prices to stabilise or rise but also a sharp rise in the number of out of town investors."
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