Mortgage blog: Why buy-to-let could be a great home for your money

Posted 23 August 2013

Are you looking to maximise your investment returns? If so, joining the growing buy-to-let boom in the UK could be a great way to get the most from your cash. Recent comments from the new Governor of the Bank of England have indicated that interest rates in the UK are set to remain low until 2016 at the earliest.

With no joy in sight for long-suffering savers, it's perhaps no surprise that many are turning to property as a way of increasing their return. And this has led to buy-to-let mortgage lending reaching a five-year high.

Low mortgage rates fuelling a buy-to-let boom

The Financial Times reports that "low interest rates and government policies are helping to resurrect a buy-to-let boom with lending to landlords surging to a near five-year high". According to new Council of Mortgage Lenders figures, 40,000 buy-to-let loans were advanced in the three months to June 2013, equivalent to over £5bn of lending.

This represents a 21% increase on the first three months of 2013 and a rise of almost a third on a year ago. Buy-to-let lending is now at its highest level since the third quarter of 2008, with the CML attributing the increase to cheaper mortgage rates and strong rental demand from tenants unable to get on to the property ladder.

"Mark Carney's recent comments have indicated that interest rates - and therefore savings rates - are set to remain low until 2016," says Keith Osborne, editor of "With savers not expecting a decent return on their cash, it's perhaps no surprise that they are turning to property as an investment. There's much evidence to suggest that house prices are rising while demand for rental property remains high. This means that canny investors can benefit from a good rental income and the potential for capital growth."

Experts also believe that the government's Funding for Lending scheme is contributing to the buy-to-let boom. Trevor Abrahmsohn, head of estate agent Glentree International, told the FT that "there's no question that the government's policies mean residential property is a natural place for investment".

Over the last few months, the Funding for Lending scheme has brought down the cost of mortgages. While the initiative was designed to encourage lending to small businesses and homeowners, many specialist lenders have also been able to reduce the cost of their buy-to-let mortgage deals.

"It's possible to benefit from buy-to-let mortgage deals at around 3% and so I'm not surprised that landlords are hoovering up this cheap money in order to expand their property portfolios," adds Osborne.

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