The credit crunch may have brought buy-to-let to a near standstill in 2008 and 2009, but there are signs that it is starting to make a gradual comeback, with the number of landlords taking out mortgages for buy-to-let properties growing by 16 per cent in the third quarter of 2011, according to the Council of Mortgage Lenders.
Rising rents have seen yields on buy-to-let properties jump to 6.6 per cent in the fourth quarter of 2011, having stayed within a range of 5.9 and 6.3 per cent for the previous five years, according to lender Paragon.
This makes buy-to-let attractive as an alternative to traditional pensions, which are suffering as the global downturn persists and stock markets are failing to provide strong returns for pension companies.
Ray Boulger, senior technical manager at John Charcol, said: “If you have found a property where the rent will cover the mortgage repayments you have two big questions. First, will rents go up if and when interest rates rise so they still cover your mortgage? And second, will property prices increase over the long term?
“If you are worried about an increase in interest rates, then you can get five-year fixed-rate buy-to-let deals at just under 5 per cent, compared to just under 4 per cent for shorter deals,” said Mr Boulger.
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