The cap on housing benefit is beginning to bite and in some areas rents are falling. There are plenty of attractive buy-to-let mortgages around as a result of the Government’s Funding for Lending stimulus which has made cheap money available to the banks – allowing landlords to increase their net income from letting by remortgaging at a lower rate.
But while average rents fell by 0.1 per cent to £731 in February, they rose in London. The latest Buy-to-Let Index from LSL Property Services – which owns the UK’s largest lettings agents network – shows the fastest falls in the North West at 1.3 per cent, followed by a 1.1 per cent drop in Eastern England. London rents rose 6.2 per cent – hiking the average for the capital by £64 a month.
But even if your rental income has not gone up you may be able to increase your returns by remortgaging at a lower rate. Lenders are out to court buy-to-let investors. The Mortgage Works has a two year fix at 2.74 per cent - less than many people are paying on their owner-occupied property.
Two years ago, landlords were paying well over five per cent for a two-year fix, so if they remortgage at today’s rate of 2.74 per cent they will see an instant uplift in their net income. For example, a £350,000 property with a £200,000 buy-to-let mortgage which was fixed at 5.75 per cent two years ago – then considered a ‘cheap’ rate - would see monthly interest payments fall from £958.33 (which is probably swallowing up most of the rent) to £456.66 – less than half the old rate giving the investor a monthly income of £400 to £500.
Maximum loan to value on the TMW mortgage is 65 per cent and there is, unfortunately, a hefty fee of 3.5 per cent of the amount borrowed. Depending on how much you need to remortgage it may be cheaper to opt for the Skipton’s deal at 3.18 per cent fixed for two years with a fee of £1,995. Take a look at moneysupermarket.com where there is a wide range of good buy-to-let mortgages on offer.