For many years buy-to-let investors have enjoyed good annual returns on the back of low borrowing rates and a boom in UK property prices.

But you would have had to be in hibernation for the last few months not to be aware that not only have interest rates increased recently but now house prices are falling too! And to make matters worse the global credit crunch means that many buy-to-let mortgage deals have either been withdrawn or tightened with higher interest rates and larger deposits.

Many landlords are funding the income gap to preserve their investment for better times. However, some landlords, who have over committed with high loan-to-value mortgages and weaker rental yields, are faced with the prospect of selling off parts or all of their portfolios before fixed-term mortgages expire, to reduce their exposure or borrowing costs. In extreme cases some are even entering into individual voluntary arrangements to crystallise their potential shortfalls to the mortgage lender.

However, amidst the doom and gloom some commentators in the property industry believe that there is still life in the buy-to-let market. They argue that with average rental yields on UK properties now at 4.6% and capital appreciation averaging 8.2% over the last twenty years, the buy-to-let market remains an attractive option for the longer term investor. In fact, if you’ve got the capital now might be a good time to pick up a few bargains from those over-stretched landlords who are under pressure to sell.

But it’s vital to do your homework. Carefully check the rental yields – rents are still rising in some areas – and be sure to take good professional advice.

Posted: May 16th, 2008 under Residential Property.
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