Landlords, cash in on 1m extra tenants!

Landlords have the chance to cash in, as the number of people renting rockets.

The private rented sector has long been an important segment of the housing market in this country, but its importance is on the rise. According to new figures from the Communities and Local Government’s English Housing Report, the number of households renting has risen by one million over the past few years.

The study confirmed that while there were 2.4 million renting households in 2005/6, this had grown to 3.4 million by 2009/10.

Indeed, private rented properties now make up 15.65 of all households in England, up from 11.7% in 2005/6, the equivalent of almost one in six homes.

Young and renting

Perhaps unsurprisingly, it’s young people who make up a significant proportion of the renting populace. The Housing Survey found that half of all renters are under the age of 35.

There’s a very simple reason for that – it’s simply too expensive for most young people to buy property. The average deposit required for a first-time buyer is now £31,700, the equivalent of more than a year’s salary for many people.

Indeed, according to Government estimates, the average age of a first-time buyer has been pushed up to around 37 years of age now. Given that by the time you reach 25, let alone 35, you probably can’t cope with living at home with your parents any more, that’s a rich source of potential tenants for landlords to take advantage of.

And they are.

Boosting portfolios

New figures from Connells Survey and Valuation have shown that valuations for prospective buy-to-let landlords have risen for the third straight month. Indeed, the number of valuations conducted in February was a whopping 12% higher than a year ago.

This is a pretty strong sign that landlords smell an opportunity to make a few quid. And it’s not just the record levels of demand that are enticing them into expanding their portfolios, but the rents they can charge.

According to the Royal Institution of Chartered Surveyors’ most recent housing market survey, rents have risen at a rapid pace in the three months to the end of January. 40% more surveyors reported a rise in rents than a fall, the highest positive in the survey’s history. Indeed, rental yields have also risen in the past four consecutive surveys.

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With demand only likely to increase – gloomy economist Capital Economics reckons that rental properties may account for as many as one in five households by 2015 – it’s easy to see why landlords are so keen to buy.

Finding the funds

Of course, the one thing holding landlords back from buying has been the lack of funding options. For some time now the choice of buy-to-let mortgages, and indeed lenders, has been fairly mediocre. However, over recent months that has improved with new lenders launching and older, established buy-to-let names returning to the market.

And now Kensington has come forward with The mortgage that will transform buy-to-let!

There’s still a long way to go, but the signs are encouraging.

Choosing the right deal

In many ways, choosing the right mortgage for a buy-to-let transaction is tougher than picking a traditional residential mortgage, as there is far more to consider. If I want to buy a house, I just need to show that I have the requisite deposit and can afford the repayments.

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But with a buy-to-let mortgage, the size of your existing portfolio is taken into account, while there are also rent cover requirements to factor in. Add to that the fact that some of the more competitive lenders are not names you’re likely to see on the high street, and it’s clear it’s a tough task.

Below I’ve put together some of the best deals in the market today, including both those with brilliant rates but punishing fees, and also those with less attractive rates but more manageable fees. However, in my opinion it is absolutely essential that you do not attempt to go it alone when it comes to buy-to-let, and that you should instead make use of a specialist buy-to-let broker. You can pick the brains of our fee-free mortgage team over at our mortgage centre, whether over the phone, by email or via instant messenger.

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At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

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