Remortgage savings could potentially slash interest payments by 25 per cent.
For every £100,000 of mortgage commitments on which they are paying the lenders' Standard Variable Rate (SVR) they could potentially save themselves a hefty £1,500 to £2000 per year in interest payments, according to the UK's leading independent
mortgage adviser, Charcol.
The latest findings from Charcol's comprehensive buy to let report point to the more testing market conditions faced by UK landlords during 2004, namely rising interest rates plus, in the second half of the year, softer conditions in the housing market. As a result some landlords have felt the pinch of falling yields, and regional variations in house price growth have also led to significant variations in investor return over recent years.
Ray Boulger, Charcol's Senior Technical Manager, comments: "Yields have fallen over the last few years as a result of rising property prices, a moderate rise in interest rates over the last year and modest falls, until recently, in rental income, making it even more imperative for landlords to ensure they have the best possible mortgage. Several deals currently available can significantly reduce the amount of interest many landlords are
paying and buy to let mortgages will get even more competitive this year."
The increasing competition between lenders in the buy to let market will often allow investors to more than make up for the recent squeeze in yields. Charcol is recommending all landlords who haven't recently reviewed their existing buy to let mortgages to do so in order to ensure they get the maximum net yield on their properties. In addition, Charcol's report signals good prospects for the buy to let market: as interest rates peak and the
housing market steadies. Landlords should begin to enjoy healthier returns, particularly the two-thirds who plan to stay in the market for at least ten years.
Boulger continues: "Buy to let yields are significantly influenced by a number of external factors which tend to fluctuate from year to year based on broader macro-economic changes and trends. The rapid growth in prices in the North of England has been the main driver of the market until recently, with investors prominent among those snapping up bargains. As a result the gap in yields between the North and South has narrowed sharply.
"Our report suggests that yields will edge up this year, when we expect interest rates to show modest falls. In the meantime, landlords must protect themselves from the negative effects of high gearing by ensuring they get the maximum return from their rental properties. Taking the time to review existing arrangements could prove incredibly beneficial and we urge all
landlords to do just that."
