London, United Kingdom (PressExposure) October 09, 2008 -- Keshav Thukaram, Managing Director at Smartlandlord.co.uk, comments on the Monetary Policy Committee of the Bank of England's decision to cut the Base Rate of interest by 50 percentage points:
"The announcement will be welcome news for landlords and may help ease the cost of their mortgages."
"Many landlords who were on low fixed rates for the past few years have been struggling once their mortgages reached the end of the fixed rate."
"Most have had to move on to much higher variable rates as the shortage of buy to let mortgages reduced options to refinance. A 0.5% cut will provide welcome relief in the current marketplace."
Buy to let mortgages are specifically designed for people who want to buy property in order to rent it out to others.
Buy to let mortgages were an initiative from the Association of Residential Lettings Agents (ARLA) and a group of eight mortgage lenders in 1996.
The buy to let mortgage scheme was set up to make it possible for private investors to invest in property without being punished by mortgage surcharges or paying commercial interest rates.
Buy to let mortgage lenders take into account what the rental income of a buy to let property is expected to be when considering the buyer's ability to keep up ongoing mortgage payments.
Property and rental valuations, therefore, form key elements of the buy to let mortgage decision-making process. You can provide the surveyor with comparables - benchmark information on property values and rental incomes for similar properties in the area.
Buy to let mortgage lenders have removed a large number of products and tightened criteria significantly.
Landlords looking for the most competitive buy to let mortgage rates have seen the number of available fixed rate buy to let mortgages, buy to let variable rate mortgages (such as discount and loan term tracker rate mortgages) and buy to let remortgage options drop by almost 95 per cent in the wake of the credit crunch.
The higher average rate for remaining loan-to-value buy to let mortgage and remortgage options means that landlords are forced to either increase rent rates or meet the shortfall themselves.
A majority of landlords opt for an interest-only buy to let mortgage, with rental income use to cover mortgage payments and running costs for the property.
Falling house prices and reluctance for many first-time buyers to purchase property has provided new opportunities for property investors as well.
Research shows that UK buy to let yields remain relatively stable, with demand for residential rental property rising.
Figures released by the Council for Mortgage Lenders (CML) show that the number of buy to let mortgages outstanding continues to rise: there are now more than 1.1 million buy to let mortgages in the UK worth Â£132.5 billion.
This is a rise of 19 per cent by volume and 25 per cent by value from a year ago. Buy to let mortgages represent 9 per cent of the total number of UK mortgages outstanding and 11 per cent of the value of mortgage stock.
On average, lenders offered a maximum of 83 per cent of the value of a property in the first half of 2008, down from 85 per cent last year.