Buy-to-let mortgage deals hit new high

According to research by Moneyfacts.co.uk, the number of BTL mortgage products on offer in July 2013 was 466, but today the number has risen by 42.7 per cent to 665.

At the same time, average interest rates charged for both fixed and variable deals have fallen to the lowest levels ever at 4.17 per cent for the average fixed rate and 4.03 per cent for the average variable rate.

The lender interest in the BTL market may be fuelled by the knowledge that it falls outside the recent Mortgage Market Review. This makes the process of granting any BTL mortgage quicker and simpler as it is not subject to the new affordability criteria that is starting to clog up the mainstream mortgage market.

In addition, commentators are predicting that the new pension regime means that retirees could consider BTL as a way of supplementing their income instead of purchasing an annuity.

Meanwhile, landlords have seen total returns on their property investments reach their highest level in four years. According to the latest Buy-to-Let Index from LSL Property Services, total annual returns on the average rental property reached 11.8 per cent in the 12 months to June, up from 5.5 per cent a year ago, and the highest level seen since June 2010. With the average gross rental yield dropping slightly to 5.1 per cent, down 0.3 per cent since June 2013, it is the climbing prices of rental properties that are bolstering total returns. According to the report, if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 13.4 per cent over the next 12 months, equivalent to £23,718 per property.

However, the London buy-to-let (BTL) market offers the lowest rental yield return in the UK, research from BM Solutions has revealed, despite it being widely perceived as a profitable region for investment.

The figures showed that London commanded rental yields of 5.7 per cent in Q2 2014 compared with the national average of 6.2 per cent, with the figure also being noticeably lower than the most profitable regions of the North West, North East, West Midlands and Wales which commanded average rental yields of 6.4 per cent.

Yields were even lower in Central London (Zones 1 & 2) at 5.5 per cent, while Outer London was marginally better at 5.9 per cent.

Phil Rickards, head of sales at BM Solutions, said: "London has long been seen as the centre of the rental market, with demand outstripping supply and the shortest void periods. However, for the greatest return, looking further afield may be just as an attractive option."

Source: www.moneyfacts.co.uk as at 22 July 2014.