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High demand for buy-to-let properties prompts lenders to offer better rates

Specialist buy-to-let lenders are offering landlords better rates on smaller deposits as rising rents, good profits and falling arrears drive up demand for property in the market.

In response to soaring demand for buy-to-let mortgages, lenders are increasingly offering better rates on smaller deposits – a move which is likely to be fuelling further demand.

Whereas many lenders previously demanded deposits of 40% to give customers access to the best rates, a number of buy-to-let specialist lenders have launched mortgage products for landlords that require just a 20% deposit.

Chief Executive of lettings agency Rentify, George Spencer, said it was “encouraging” that the range of products for larger loan-to-value advances was becoming increasingly broad.

Optimistic outlook on buy-to-let market

Lenders have expanded their product range in response to soaring demand for buy-to-let mortgages: according to the Council of Mortgage Lenders (CML), buy-to-let lending for house purchases rose by 18.6% in 2013 compared to the previous year.

Figures have been driven skyward by the rising number of people renting in the private sector – Knight Frank recently confirmed that a sixth of the UK population was living in private rented accommodation.

On top of this, the latest BM Solutions/BDRC Continental Landlord Panel revealed that around 80% of landlords are able to make a profitable full-time living from their buy-to-let property investment.

What’s more, the average amount owed by tenants in arrears has plummeted to a three-year low of £1,499 in spite of rising rents.

John Willcock, Head of Mortgages at the Post Office, said: “There has been a significant increase in the demand for buy-to-let mortgages in the past 12 months as more borrowers consider the rental market.”

Ray Boulger, a mortgage broker at John Charcol, forecast that more lenders will move into the “profitable” buy-to-let mortgages space over the course of the year.


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