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Things are Looking Up for Buy-to-Let

Found in Category: News, Mortgages August 7th, 2008

In the space of a few months news reports have signaled the death of the Buy-to-let market, continuing gloom and doom and significant losses for recent would-be landlords.

But the grey clouds have a silver lining.

Most Buy-to-let properties are purchased using an ‘interest only’ mortgage. What this means is only the interest is repaid and the actual original loan does not go down at all. In fact, many landlords remortgage existing properties to release funds for buying other properties so loans often increase.

Falling property prices have restricted the availability of cash for many landlords and prevented them from buying.

But recent news is claiming property prices may still fall but over the next few years are set to rise by up to 30% (Having dropped by approximately the same amount in some places!).

On the surface then, a 30% increase suggests things could start to boom again when in actual fact it may just take several years for prices to recover back to their former levels.

Misleading as it may be it is still positive news and gives landlords some security that recent purchases may produce a profit if they are kept for several years.

The fact that prices are anticipated to rise again also means that landlords and future landlords will be watching and waiting for the moment prices stop falling and start to pick up again before snapping up some bargains.

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