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Eezy Peezy Mortgages News
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Is Buy to Let for you?
Investors abandoning the stock market in the wake of the dot-com bubble found that the property market was an extremely profitable place to be. In 2002 house prices in the UK rose by 15% - and that was just the average. If you picked the right area and the right property then gains were much, much higher. The rise in property prices has a double effect for the shrewd investor - not only does it create the possibility of capital growth, but the increasing cost of house purchase has meant a growth in the rental market, and a growth in interest in a relatively new financial product - the Buy to Let mortgage. According to online sources the number of buy-to-let mortgages almost doubled from 1999 to 2000 as battered investors looked for a safer place to stash their hard-earned cash.
The theory is simple. Buy a property and rent it out. Use the rental income to pay the buy-to-let mortgage, and allow the capital gain to accrue. Some people have carried this theory to the extreme, building large property portfolios, maximising their benefit from rising house prices. This is all well and good as long as house prices continue to rise - but beware, a collapse in house prices could leave you in a very awkward position. As always, do lots of research and buy wisely.
So what properties do well as buy-to-let? Well you have to consider the rental market - students, young professionals, possibily companies looking for alternatives to expensive hotel accomodation. People looking for accomodation with good transport links close to restaurants, bars etc. For example, city centre apartments have become a favourite for buy-to-letters - with plenty of businesses located centrally, there are a good number of people looking for accomodation, and city living is beginning to take off in the UK with a growth in the 24 hour cafe-bar culture.
If you explore the market place you will find that most major banks and building societies are prepared to offer Buy to Let mortgages, but be aware that there is a catch. You will be expected to provide a larger deposit (typically 25%), and the interest rate payable may also be higher. Also, you should put at least as much time and effort into researching your potential buy-to-let property as you would if you were buying a house for your self; so the rules are the same as always - Location, Location and Location! Also, be aware of the costs involved - both in the purchase (legal fees, surveys, stamp duty etc), and in the running costs (maintenance, decorating, furnishing). Also factor in estate agents fees if you want someone else to manage the rental property for you.
As important as the above is your contingency plan. What happens if there is a fall in property prices? What happens if you can't find a tenant for a significant period of time. It is worth thinking these problems through before they become a real issue. Check out Buy to Let mortgage providers
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| Perspective August 2003 - UK House Prices |
Anyone watching the news on UK house prices over the last 18 months has had a roller-coaster ride as news from "expert" sources alternately predict doomsday crashes and/or booming markets! So which is it this month? We've had a look at some of the latest news to see if it gives any more idea of what is really happening with UK house prices.
Well the first thing to note is that activity in the UK market has picked up. According to Government figures, the number of property transactions increased from 103k in June to 115k in July. This new-found confidence has most likely been brought on by the end of the Iraq war and by the failure of the long-awaited "crash" to materialise.
The Government numbers are also backed up by the UK's biggest lender, Halifax, who reported yet another house price increase in August, with the average house costing an extra 1.3%. This still keeps the annual rate at up over 19%, but the rate is slowing as some of the higher monthly increases last year drop out of the figures.
So where do we go from here? Well unemployment is still extremely low, interest rates are staying at there lowest for a generation, and confidence is obviously on the increase. All these factors add up to stability in the market. Houses are still affordable and the buy-to-let market has confounded predictions of its imminent demise. Our view is that a reduction in the supply of first-time buyers able to afford housing will act as a gentle brake on the market. Also there are still some amazing fixed rate and low-cost mortgages available which will help to support confidence amongst home-buyers. Click here for links to low-cost mortgage providers.
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| Is it time to re-mortgage? |
With interest rates somewhat lower than they were 12 months ago, anyone on a fixed rate mortgage should consider whether it's time to re-mortgage, even if they have to pay a penalty fee to get out of their existing deal. Penalty clauses vary dramatically, with some companies looking for 1% of the loan amount for early redemption, and others looking for considerably more than this. Whatever the deal, you need to consider what it would cost you to cancel your existing mortgage including penalties and fees, and what it would cost you to take out a new one.
Then look at the difference in interest rates between the deal you could get now, and the rate you're currently tied in to; you could well make a considerable saving. Be careful to look at any other differences between your current deal, and the deal you're getting with the new mortgage - if you're a couple of years into a five year mortgage, then taking out a new five year deal may or may not be a good thing to do, depending on what happens to interest rates three years from now; and few people can agree on what will happen three months from now!
If the saving is negligible, then you probably don't want to do anything yet - if interest rates go down further you'll have missed the opportunity to save even more, but if they rise you won't have lost too much. And if the penalty clause for terminating your existing deal is high, then you're probably better off leaving it, especially if you don't have long to go on your term. Even if the saving is significant, you'll have to weigh up the possibility that they might go down further and you could have saved even more. Decisions, decisions.
If your current deal is a variable rate one, then you may well have no penalty clause to pay if you change. For you, now's a great time to consider a Fixed Rate Mortgage if you're one of the people who think that think interest rates have reached the bottom. Alternatively if you're simply looking for the best rate for now, and aren't concerned about what will happen to rates in the future, then a variable rate mortgage might be suitable for you, or you might be able to get a discounted mortgage that suits your needs. As always, consult a Financial advisor if you are in any doubt, because these are important decisions.
Whilst you can make big savings with the right deal, it can cost you a lot of money if you get it wrong. Think it through, check out the deals on offer, and take all the advice you can get!
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| Homeowners undecided on house prices |
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According to mortgage lender Woolwich, homeowners in the UK are unsure where the red hot housing market will go next. Their recent survey reports that 53% of those asked think that prices will continue to rise through 2003, with the remainder expecting some sort of decline. UK house prices rose an average of 30% during 2002.
more Finance stories ...
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| BOE says rates unlikely to fall |
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Speaking to the UK Treasury Select Committee, Mervyn King (BOE Governor) said he thought it was reasonable to assume rates had hit "a low".
more Finance stories ...
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