Low interest rates, booming rents and sliding house prices - a landlords dream

A slew of cut-price mortgage deals is tempting many to take the plunge into the market. But further house price falls could hammer unwary investors unless they are prepared to invest for the long term.

Experts warn that if landlords fail to pick the right mortgage or choose the wrong part of the country to buy their property, they could find themselves severely out of pocket.

Peter Gettins, of broker London & Country, says: 'With first-time buyers struggling terribly, there's increasing demand for rental properties and, as a result, rents are increasing while mortgage rates are at historic lows.

'With such low costs and high demand, buy-to-let presents an attractive prospect.

'But prospective landlords need to go in with their eyes open and understand all the costs and risks. Even in a period of high demand, it's important to understand the local market.'

Falling house prices can eat into the return from a buy-to-let investment, especially if held for the shorter term, such as five to seven years.

While rent can provide an annual income stream, a fall in the capital value of the buy-to-let property can quickly turn your investment into a loss.

Aaron Strutt, an adviser at mortgage broker Trinity Financial, says: 'Building societies have been offering the lowest rates over the past few months, but some of the bigger banks are also starting to launch some best-buy mortgages.

'While it is a good time to get a buy-to-let, it's essential to do your research to unearth the right property.'

Where are the best buy-to-let mortgages?

Choosing the right mortgage is critical, as some banks charge fees of 3.5 per cent of the loan amount, but there are rates available with much lower costs.

NatWest offers a two-year, fixed-rate, buy-to-let deal at 3.49 per cent. Borrowers need a 40 per cent deposit and there is a £1,999 fee.

The monthly repayments on a £150,000 loan would be £750, with total borrowing costs of £19,999 over the two years.

The Mortgage Works is offering the lowest headline interest rate, with a two-year fixed-rate at 3.39 per cent and a 3.5 per cent arrangement fee. The borrower needs to have a 40 per cent deposit.

Monthly repayments on a £150,000 loan would be £742. But the higher arrangement fee makes the overall cost a lot higher - £23,058 over two years.

Coventry Building Society has recently launched a two-year, fixed-rate deal at 3.75 per cent, with a 35 per cent deposit and £1,499 fee. Monthly repayments on a £150,000 loan would be £771, with total costs of £20,003. Figures from The Council Of Mortgage Lenders showed landlord mortgage borrowing rose by a third in the first three months of this year compared to 2011.

Source - This is Money

If you are a landlord looking to invest in the Leeds rental market, please do not hesitate to contact us and we will be happy to give you all the advice you need to ensure you make the correct decisions on property, area and rental value.

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