Rental returns

QTR Stories_AUT21e

– Enough new homes are being built: there aren’t.
– A deposit for first-time buyers is easy to secure: it isn’t.
– Mortgage interest rates are sky high: they aren’t.

Were those factors true, then the Private Rental Sector would be less appealing to Landlords. As it happens, demand remains high, and if Landlords want to remortgage, then property price increases over recent years (combined with low interest rates) are working in their favour.

A downside

Of course, it’s not all plain sailing, as Landlords still face sizeable regulatory and tax issues to navigate, and many will have suffered from the recent support afforded to defaulting renters.

Renter demand

As said, demand remains high, but the hotspots have changed throughout the UK compared to pre-pandemic times. Some renters (as with house purchasers) have moved away from the cities.

Overall, the UK average monthly rent figure is at an all-time high of £1,053, up 6.9% on the year prior. Regionally, the biggest annual growth has occurred in Wales (12.8%), South West (11.9%), East Midlands (10.7%), and Scotland (9.5%). In fact, all regions have shown an annual uplift, including Greater London (3.6%).
(Source: Homelet Rental Index, August 2021 data, released September 2021)

House Price growth

Over recent years, many Landlords will have benefited from house price rises. If this is the case, then it should deliver more options for those nearing, or coming off 2- and 5-year mortgage deals.

For example, in August 2016 the average residential house price was £206,145, five years on, it’s £248, 857 – a jump of over 20%.
(Source: Nationwide, House Price Index, August 2021)

In some cases, that may mean access to lower LTV rates, which should open up the better deals. And, for others, it will present opportunities to raise further funds to renovate the existing property, or help to access money to purchase additional properties.

Buy-to-Let interest rates

This information may be relevant should Landlords be nearing the end of their deal period, or are simply looking to remortgage.

The comparative ‘average’ rates across all LTVs are even lower than the 2 and 5-year ones that could be coming to an end. And, if the Landlord falls into the lower LTV arena, then they could have access to even better rates:
1 September 2016 = 3.89% (historical 5-year deal rate)
1 September 2019 = 2.97% (historical 2-year deal rate)
1 September 2021 = 2.94% (2-year deal) / 3.25% (5-year deal)
(Source: Moneyfacts, Buy-to-Let Average Fixed Rate deals, 1 September 2021)

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that the rental income will be sufficient to meet the costs of the mortgage. The value of your Buy-to-Let property and income from it can go down as well as up. You may also require advice on the legal and tax issues.
The Financial Conduct Authority does not regulate legal and taxation advice, and most Buy-to-Let mortgages.
HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

You may have to pay an early repayment charge to your existing lender if you remortgage.

Your property may be repossessed if you do not keep up repayments on your mortgage.

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