12 February 2015
BUY-TO-LET investors have made £12,000 profit on every £1,000 they put into property since mortgages for landlords were first launched in 1996 – returns that have far outstripped every other type of investment, according to an analysis by one of Britai
The report by Paragon Mortgages to mark the 18th birthday or coming of age of buy-to-let, predicts that landlords will continue to make an average of 11% a year for the next decade.
It found that since 1996, £1,000 invested in a buy-to-let property has turned into £13,048, an annual rate of return of 16.3% a year, buoyed by fast-rising house prices and rents. Over the same period shares would have earned investors 6.8% a year, bonds 6.5% and savings in the bank 4%.
The figures have been released as tough new affordability rules for mortgage customers that came into force requiring lenders to carry out detailed checks on a borrower's spending and ability to pay But buy-to-let investors are exempt from the new rules they are regarded as businesses rather than homebuyers.
It is estimated that one-in-seven mortgages go to landlords, with lenders having granted 1.5m mortgages worth £174bn to buy-to-let investors since 1996.
Linley & Simpson said the figures underscored the growing importance of the private-rented sector, which now represented 18% of the YK's housing market.
Meanwhile, a separate report from Scottish Widows, which examines levels of saving among young adults, has found renters now face a 15-year wait to buy property. The typical private renter is able to save around £2,100 a year, it found, while the average first-time buyer deposit is nearly £31,000. Scottish Widows said 33% of private renters were not putting any money aside and 29% had no savings whatsoever.