Returns for buy-to-let investors soar as private rents increase
As rents for tenants increase, buy-to-let investors are making greater returns. We take a look at the top BTL mortgages on offer.
Rents in the private sector in England and Wales are just £1 away from an all-time record high, a new report by LSL Property Services has shown.
In August average rents rose to £743 a month, a 0.7% jump from July, while in London the yearly rise was 4.8%.
The only time rents have been higher was in October 2012 when they were at an average of £744. So with rents soaring is now the time to get into the buy-to-let (BTL) market?
Increasing rent
Annually average rents are up 1.3% and five regions out of ten have seen an increase during this time.
After London, tenants in Wales saw the second biggest jump of 2.3% followed by those in the East Midlands where prices went up 0.9%.
Not all areas were on the up though; rents in Yorkshire and the Humber fell 1.6% over the year while in the North West they were down 1.5%.
Buy-to-let returns
Average returns for BTL investors were at 6.2% in August, compared to 5.6% in July. This works out as an average cash return of £10,207 to the BTL investor, with a rental income of £8,051 plus a capital gain of £2,156.
Given that property prices have been steadily climbing in the past few months, the returns for BTL investors are also set to continue upwards. It’s predicted they could reach an annual return of 13.1% during the next 12 months, which is equal to around £22,065 per house.
The combination of high rents, rising house prices and healthy returns for BTL investors has resulted in a huge boost in BTL lending. In August it hit £5.1 billion, the highest amount seen since the third quarter of 2008.
BTL mortgages
The price of BTL mortgages has fallen this year and the average interest rate now lies around the 3% mark. One of the cheapest rates around comes from HSBC, at 2.99% for three years for a maximum loan-to-value (LTV) of 65%, although this mortgage does come with upfront fees of £1,999.
BM Solutions and The Mortgage Works also offer BTL mortgages at 3.39% which are fixed for two years and have fees of £995.
In the table below, I’ve picked out some of the best fixed rate BTL mortgages on offer right now.
|
Lender |
Duration of fixed rate |
Introductory rate |
Max LTV |
Fees |
|
Three years |
2.99% |
65% |
£1,999 |
|
|
Three years |
3.29% |
75% |
£1,999 |
|
|
Two years |
3.39% |
60% |
£995 |
|
|
Two years |
3.39% |
60% |
£995 |
|
|
Three years |
5.69% |
70% |
£995 |
|
|
Two years |
3.49% |
75% |
£1,999 |
|
|
Two years |
2.99% |
75% |
2.5% of the loan (max of £3,000) |
See the latest mortgage rates and get expert advice
This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker (such as one of our brokers here at Lovemoney), before acting on anything contained in this article.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
More on property and mortgages
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The people who affect house prices
How to pay for DIY home improvements
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