Low interest rates convert savers into landlords

February 2, 2015 by Brendan O'Neill

Landlords

The latest figures show that the extended duration of the all-time low interest rates has driven a buy-to-let boom of around £12 billion.

It is believed that people who are fed up and disheartened with the rock-bottom interest rates on offer are branching out and stepping on to the buy-to-let ladder.

Spanning January to November, there was a 34% increase in the volume of new buy-to-let property purchases; this was up by £3 billion more than the previous year. November alone saw approved loans to landlords increasing by 9%, while residential mortgages fell by 7%.

Generally, buy-to-let mortgages cost more than a traditional residential loans, and lenders will usually apply a steeper initial fee of anything up to £2000, and the overall interest rate that the loan is charged at is greater. Whilst the cheapest buy-to-let rate currently stands at around 2.29 percent, residential loans are as low as 1.29 percent.

However, with the Bank of England Rate still sitting at the all-time low of 0.5%, as well as the borrowing rate being so low, the return for those with capital to save is equally as low, meaning that it can sometimes be more profitable to cash in on the current rental returns.

As a professional working in the mortgage industry, you will have completed your CeMAP training and become accredited in the end exam. Dependant on your employer and if they offer a buy-to-let option to borrowers, you may be the contact point for those seeking to purchase a property for rental purposes.