If you’ve been considering making a buy to let investment and have already started doing your homework, you’ll no doubt have noticed that the banks are currently offering an impressive array of buy to let mortgage products. In fact, mortgage products designed for investors of this sector have risen by an incredible 35% in the UK in the last quarter of the year – a surprising figure when you think about the current state of the economy.
So is it a good time to be making buy to let investments and are the banks really so willing to lend? Well, given that the number of buy to let property investment sales do not appear to have increased dramatically, nor has there been a huge rise in the number of mortgages approved, it seems strange that banks are so eager to offer new products, because, let’s be honest, it’s more likely that there’ll be doom before there’s a boom in the property market.
Banks’ statistics show that average house prices and mortgage approvals are nothing to write to home about yet they are continuing to suggest that they are supplying demand. So before you start reaching for the buy to let investment calculator and estimating your potential buy to let return on investment, we need to identify the reason why banks are being so generous. What’s it for them? And more importantly, what’s in it for you?
It is fair to say that due to the global economic downturn, everyone now possesses less money and this why the banks must find a way to generate some money of their own to fill the shortfall. Banks are basically dressing up this plight and calling it a property investment. Buy to let markets have seen rental prices increase on paper, however much of this could be down to the fact that new listings with high rents because the bank or rental agency claim that rents are rising.
The key is to look beyond the media hype before making your investment. Buy to let is a good idea in certain circumstances but be aware that a lot of the banks’ claims to the markets being on the up are to be taken with a pinch of salt. The bottom line is the public only have a limited amount of money. When this limit is reached, the rental sector will almost definitely grind to a halt. UK legislation does not currently have much control over how mortgage products are put together and marketed, therefore the media are free to say what they want.
Be cautious and only begin your buy to let investing process when you are 100% certain that the market is in good shape.