The time is ripe for buy to let!

The missing ingredient for a buy-to-let boom is beginning to appear.

2011 is beginning to look like it will be a great year for buy-to-let landlords.

A survey of mortgage brokers by specialist buy-to-let lender Paragon Mortgages has found a booming confidence when it comes to landlord prospects. A whopping 46% of brokers said they expected to introduce more buy-to-let business during 2011 compared to 2010. Indeed, 17% reckon their buy-to-let business will jump by more than 10%!

Rising confidence

It’s not difficult to see why there is such burgeoning confidence, as things look pretty attractive for landlords at the moment.

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For starters, the demand for rental properties is significant. The Association of Residential Letting Agents said at the end of last year that demand far exceeds supply, and will continue to do so for some time to come, with 75% of ARLA member offices reporting more tenants than available properties.

With it becoming ever more difficult for first-time buyers to get onto the property ladder, more and more are being forced to turn to the rental sector. And that situation is unlikely to change any time soon, giving landlords a large potential customer base to take advantage of.

Ramping up rents

What’s more, those high levels of demand are leading to increased profits for landlords, with many looking to ramp up the rents they charge this year. A recent survey found that 41% of landlords planned to increase rents during 2011. And some aren’t planning just a little increase – 10% reckon they will put up rents by between 8% and 10%!

With rents already standing at an all-time high, at an average of £692 a month according to LSL Property Services, the opportunity is there for landlords to really cash in.

Of course, none of that is particularly new. And the one thing that has always been pointed out that is missing, and preventing landlords from expanding their portfolios as they may wish, has been the poor range of mortgages on offer for landlords, both in terms of rate and range of choice.

But that seems to be changing too.

More mortgages!

According to Paragon’s survey, more than half (51%) of brokers reported an improvement in the availability of mortgages for landlords in the final quarter of 2010, with 46% expecting a similar improvement during the first quarter of this year.

And that optimism looks to be well founded. Just this week, Kensington has revamped its range, offering deals up to 85% loan-to-value. What’s more, the lender’s deals are getting easier to access – they are open to new landlords as well as those with large portfolios, while the rental cover requirement has been cut from 125% to 120%. All in all, it’s a real shot in the arm for landlords.

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Kensington is not alone, either. Paragon Mortgages has also improved its product range this month, with more options for small landlords, while the entrance of new lenders to the market last year, such as Precise Mortgages and Aldermore, has also helped to offer a bit more choice for those looking to invest in property.

This is just a start, but with more and more lenders showing a willingness to lend to all sorts of different landlords, with all sorts of different needs, there is cause for some optimism. The simple fact is that for many, renting is the only option, so it's to be celebrated that the current conditions are likely to attract new, quality landlords into the market, and the existing landlords to expand their portfolios.

Relying on the State to provide such quality rented housing stock is simply unreasonable at the moment. 

Advice is invaluable

In the tables below I have put together a round-up of some of the most competitive buy-to-let mortgages around at the moment. A quick glance down the table will tell you that if you plan to invest in property, the best deals won’t be found at your high-street bank.

Indeed, many of the lenders most active in the buy-to-let sector will only lend through mortgage brokers. That makes it even more vital than usual to take advantage of some decent, independent advice when sorting out your mortgage, in order to ensure you don’t miss out on a great deal that could save you thousands in the long run. Brokers will also be able to guide you through the complexities of each lender’s criteria – and believe me, when it comes to buy-to-let portfolios, that criteria does get pretty tricky.

To have a chat with our fee-free mortgage team, head over to our mortgage centre where you can pick their brains via email, instant messenger, or over the phone.

Ten tremendous fixed buy-to-let deals

Ten tremendous tracker buy-to-let deals

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Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online

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.