Has the recession burst the buy-to-let bubble?

Nia Williams

June 9, 2009

A further quarter of Brits (23%) think those invested in the buy-to-let market are likely to just about break even.

Investors with buy-to-let properties are very much feeling the financial squeeze of the current economic climate, after basking in years of relatively easy money. Not only is the housing market in some areas over supplied with rental properties, but the value of equity or profit in buy to let properties has fallen. Whilst the interest rates of residential mortgages have fallen recently, buy-to-let mortgage rates have remained more expensive than residential mortgages and landlords are required to find a hefty 25% or more cash deposit to qualify for a buy-to-let mortgage.

The research also reveals how there is a generation gap when it comes to opinions on the buy-to-let market. One in ten of those aged over 55 expresses caution and expects those invested in the buy-to-let market to lose a lot of money. Whereas one in ten 18-34 year olds are slightly more frivolous, believing buy to let properties will still make a lot of money. Londoners are also most inclined to look on the bright side, with nearly one in ten (8%) saying they believe buy-to-let property investment are still a good opportunity to make a lot of money. David Elms, chief executive of Unbiased.co.uk, comments: “The years of the booming property market made investing in bricks and mortar very attractive. But unfortunately this boom couldn’t continue forever and those invested in the buy-to-let property market may now be facing losses due to the current economic climate. Furthermore, the number of buy-to-let mortgages on offer has greatly reduced, meaning those lenders remaining in the buy-to-let space have tightened their lending criteria making funding even harder to find for potential landlords.

“If you are considering becoming a buy to let landlord, or if you are struggling with existing mortgage repayments, we urge you to speak to a whole of market mortgage adviser for the best possible advice on your situation. A whole of market mortgage adviser can also talk you through the opportunities and potential pitfalls of the buy-to-let market and whether this is appropriate for you.”

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