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BTL investors cash in on rental demand

BTL investors cash in on rental demand

Category: Mortgages

Updated: 12/10/2011
First Published: 12/10/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Buy-to-let investors continue to reap the rewards of a surge in demand for rented properties, the latest research into the sector has revealed.

According to Mortgages for Business, ongoing growth in tenant demand has helped push the yields available through buy-to-let properties higher during the third quarter of the year.

Despite the recent rise in the number of residential mortgages and loans suitable for first-time buyers, it seems many people still cannot buy a home of their own and are turning to rental accommodation instead.

The combined demand from these reluctant renters and those who are happier to let a property is pushing rents higher and driving the growth of average yields as a result.

Indeed, average yields from straightforward vanilla buy-to-let mortgages have increased to 6.3%, up from 5.8% in the second quarter.

However, the best yields continue to be provided by more complex buy-to-let deals, which currently return an average of 9.3%.

At the same time, the latest research from Paragon Mortgages suggests that tenant demand will continue to grow for the foreseeable future.

In Paragon's survey, 44% of landlords noted that tenant demand had increased in the third quarter, while almost half (49%) said they expect demand to keep growing over the next 12 months.

Just over a third (34%) of landlords reported a rise in their rental income during the quarter.

One in ten of those who reported a rise claimed it had increased by between 2% and 4%.

"With the base rate set to remain low for the medium term, property prices falling and demand from tenants showing no signs of dropping, investors will continue to capitalise on the healthy returns available from the buy-to-let market," said David Whittaker, managing director at Mortgages for Business.

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