Return of buy-to-let, if you can get a loan

Buy-to-let dream: Mortgage brokers are getting twice as many enquiries as they were just three months ago

The buy-to-let dream is back - with the big price comparison websites saying more than one mortgage enquiry in ten now comes from a hopeful landlord. Several are getting twice as many investment enquiries as they were just three months ago.

Mortgage brokers agree that clients are ready to trust property as an investment again.

"They think prices may have reached the floor and demand from tenants will stay high even if the economy remains in the doldrums," says Katie Tucker, of broker Mortgageforce.

But while many seem to like the idea of buy-to-let again, they won't like the reality of finding a mortgage. Brokers warn of three key shocks:

  • The number of buy-to-let mortgages has shrunk by more than two thirds in the past year.
  • Banks are far from generous when setting interest rates on new buy-to-let loans. Residential mortgage rates are almost two per cent cheaper than in the summer of 2008, but average buy-to-let rates have fallen just 1.13 per cent.
  • The up-front fees you pay to get a buy-to-let loan aren't just high, many brokers are calling some of them 'extortionate'. The two-year base-rate tracker at 3.99 per cent from Nationwide's specialist lending arm The Mortgage Works may look attractive to an investor with the necessary 40 per cent deposit, for example. But the £4,500 fee will remove most of the shine - as this is on top of the legal and valuation costs you have to pay to get the loan and the stamp duty you'll have to pay to get the property.

Best advice for anyone who has dusted down their old buy-to-let dream is to do the sums carefully before assuming you can get a mortgage at all, let alone turn a profit in the tough new climate.

It is also worth noting that the professionals are still ambivalent about the long-term future of buy-to-let. Last week, two of the UK's biggest buy-to-let investors, former


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