Buy-to-let rental returns have reached a two year high as a glut of UK renters combined with a lack of property allows landlords to push up rents and make some serious profits from their property investments.

According to LSL Property Services, rents increased by 0.3% in February 2010 to an average of £658 a month. Its index revealed that yields rose to an average 4.8%, and the total return from investing in buy-to-let over the last year including house price increases rose to 10.6% overall – the highest return recorded in the last two years.

But the data also showed the importance of picking the right property – while the average yield hit a two-year high, it found that the North is lagging far behind the South, with southern areas “storming ahead” as northern ones languished.

David Brown, commercial director of LSL, says: “The recovery in the South began much more quickly than in the North – the ripples from the housing downturn are still affecting the market in the North, whereas the South has been enjoying a new wave of optimism over the last year. We would expect returns to improve in the North as the recovery in the South spreads out, but it may lag behind for a few months yet.”

LSL predicts that new entrants to the buy-to-let market would make an annual return of 8.5%, or £14,000 on a typical property over the next 12 months.

That's a huge margin, and one that would be difficult to match if investing in the stock market. If you think you could make similar returns from a property investment, talk to a buy-to-let mortgage expert about getting hold of some credit to invest in something that could deliver some serious returns.

SOURCE: LSL, 16/03/10

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

There is no sign of the Bank of England's low base rate changing any time soon, which means more buy-to-let borrowers are looking to tracker mortgages to help them save and make the most of their rental income.

According to Legal & General, 30% of buy-to-let mortgages were variable rates over the last three months, up from 13% at the halfway point of the year.

Stephen Smith, director of housing at Legal & General says: "There has been a distinct shift towards tracker and variable rates by landlords and the proportion of buy-to-let mortgages on variable rates arranged through our mortgage club has more than doubled in three months."

However, L&G says its data shows that landlords have traditionally preferred variable rates of one sort or another and that the big leap it has seen is from a low starting point – In the first three months of last year, for example, over 60% of buy-to-let mortgages were on variable rates.

Of course, in this low rate environment a tracker is always a risk – if base rate moves up quickly then a buy-to-let borrower with a tracker mortgage may find that they are dealt a huge rate shock. Smith says: "Bank base rates at this current level are far from normal and things will not go on like this forever."

Tracker, variable or fixed – there is only one best buy-to-let mortgage for you. And that can only be chosen correctly after careful consideration with a mortgage specialist, who knows the buy-to-let sector inside out. They will assess your rental potential, your long-term goals, your debts and your residential loan and use all that to help make a decision as to what buy-to-let loan is right for you.

SOURCE: L&G, 07/10/09

To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog

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