For those with cash to invest, one particular sector may seem more attractive now than ever: buy to let.
But is now a good time to invest? Mortgage lenders are far keener to lend money these days, with a broad range of enticing deals on offer. Some lenders are making it easier in other ways too: The Mortgage Works, owned by Nationwide, recently abolished its upper age limits regarding when mortgages mature – namely 75 for a first-time landlord, and 90 for the more experienced.
Meanwhile, house prices continue to rise, which may make the notion of entering the buy to let market more immediately desirable.
But is it a prudent move? The big question is if – or probably when – interest rates will go up, and by how much. If they go up by the rates suggested by Mark Carney, the Bank of England’s Governor, then some experts believe some buy to let investors will be looking at falling income within a few years. This potential view of future events is painted by calculations by Your Money.
Latecomers to buy to let could be especially at risk.
Mr Carney hinted that rates could rise to as much as three per cent by 2017.
A three per cent rise in the Bank Rate could see rental incomes drop significantly – primarily because rent increases are unlikely to keep a pace with rate hikes.
Of course, no-one really knows for sure what will happen as regards rate rises, or rent rises. But there does appear to be more pressure on average yields than before.
Are you one of our let property insurance customers? Do you see opportunities in the sector, or should investors think more carefully before laying down their cash?