Investment property sector sees early 2012 boom
The Council of Mortgage lenders has reported this month that it was not just the residential sector that saw a rise in activity during the turn of the year. An estimated 32,300 loans were agreed for buy to let mortgage borrowing, which has been calculated at an overall total of £3.7bn in funds. The news will spark a positive feeling for contractors looking to invest, as many areas of the UK saw the price of property fall, but conversely saw an increase in rental yields across the country.
It is now estimated that the buy to let market represents 12.8% of the overall value of borrowed mortgage funds in the UK. Although it may appear to be prohibitive to many, due to the minimum deposit required averaging at 25% of the properties value, those with cash reserves could look to benefit from the current conditions.
It would appear that the market has evolved in recent times, as many market experts are noting. Tracy Kellett, of UK buying agents, BDI Home Finders, said: "More landlords are buying up three to four bedroom homes, which are popular with the growing number of families that are renting. This is a whole new market for buy-to-let, and is particularly short on supply."
Additionally, the sector continues to out perform the residential market when studying the arrears figures for the first quarter of the year. Currently, 2% of residential borrowers have fallen behind on loan payments, compared with 1.7% of buy to let borrowers. The repossession figures suggest a different story, with the rate edging 0.12%, in contrast to the 0.08% figure for the residential property sector. However, the CML stated that this was not a shock, as lenders continue to assist residential homeowners to keep their properties and to avoid the costly process of repossession.
Although the outlook appears to be positive, with the CML starting to revise its forecast that 45,000 properties would be repossessed through out the year, they also cautioned that the stability of the market is finely balanced. Much rests on the ability for the populace to cover household costs, with increased cuts to benefits, continued drops in employment levels and the fear that increases to mortgage interest rates could halt any recovery.
Paul Smee, the director general of the CML commented: "Combined efforts by borrowers, lenders and money advisers are ensuring that payment difficulties are being managed effectively, with the result that the number of repossessions remains relatively low."
"Repossession really is a last resort, as the numbers show. Anyone worried about their mortgage should be assured that lenders will try to help them get back on track, as long as this is a realistic prospect."
Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
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