Buy-To-Let Marks “Coming Of Age” With Profits That Outstrip Other Investments

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 Britain's biggest lenders.

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.

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