03 Jun London Buy to Let Mortgages in 2015
As a mortgage broker in London, we’re seeing a lot of clients asking us about Buy to Let mortgages across the city, looking to tap into the capital growth that’s returned to the property market. We’ve drawn up an example to show why these investments are so popular.
These numbers are real.
Purchase Price £260,000
Deposit Required £65,000
Interest Rate 2.75% 2 year fixed
Gross Rental £1200
Mortgage Interest £446 pm
So on a gross basis, it will take the client 7.2 years to get their deposit back.
Risks & Considerations:
What will interest rates do?
What will rentals do?
What will property prices do?
What’s the exit strategy / tax situation?
This looks like a TERRIFIC set of numbers. It’s fill your boots time.
Elsewhere in the world of mortgage lending, things look rosy. After 18-24 months of surging property prices in London – it seems lending has calmed down. (It is still very steady…).
There is lender based chat that due to FCA lending regulation, they can only lend 15% of theirs at more than 4.5X income on affordability rules. Things have calmed down on income stretches for now. This will change in due course.
London Buy to Let mortgages – The Rental Market
Being restricted by rental calculations. With a notable exception, the best calculation is 5% at 125%. A year ago Woolwich were rattling out the loans at 3.69% at 125%. It makes a big difference. Keep a keen eye on this if you are in the world of buy to let.
Buy to Let Rates
Rates. Are low. We’ve fielded a lot of calls from clients on 5 year rates wanting to buy themselves out to get the better rates available now than a year of two ago. There’s no great chat of rising UK rates currently, let’s see what happens after the election. Certainly the US will raise rates before the UK – that story runs on….as it has since 2009.
Check the press out – corporations are taking on huge long term debt at these remarkably cheap rates. We live in an extraordinary time of cheap debt. A golden age of cheap borrowing. The press would have you believe we must all be fearful. Which belies the fact – borrowing a tonne of cash costs virtually nothing.