Low savings rates could boost buy to let investment

According to Paragon Mortgages, low savings rates could mean a boost in buy to let investment.

Savings rates are less than 1% for many savers but by choosing the right property there could potentially be better returns from residential investment property.

Paragon Mortgages’ Private Rented Sector (PRS) Trends report shows that in Q1 2009 the average annual yield was up 0.5% to 6.2%.

The report also showed that almost a quarter of buy to let investors are planning to purchase investment property in 2009.

Residential buy to let investment property tends to be something to consider for the long term.

The average property investor anticipates holding their property for over 16 years according to the Association of Residential Letting Agents (ARLA).

Paragon Mortgages’  managing director, John Heron, says ‘The outlook for house prices in the short-term is still uncertain, but yields are strengthening because tenant demand is strong and property investors are able to pick up bargains.’

Whilst there has been a short-term increase in the ‘accidental landlord’ (people who let out property because they cannot sell it), they are most likely to sell when the property market returns to normal, according to Heron.

He added ‘The expansion that the private sector needs is likely to come from existing landlords increasing their portfolios and new investors attracted to residential property because of the solid long-term returns.’

Paragon Mortgages is a member of ARLA and the National Landlords Association (NLA).

In addition to mortgage finance, buy to let investors need to consider their needs around tenant assessment services, Energy Perfomance Certificates and landlords insurance.