Buy-to-let mortgage sector soars

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by Elaine Frei

The buy-to-let sector is thriving. According to the Council of Mortgage Lenders, at the end of 2006 there were 850,000 buy-to-let mortgages in the UK worth around £94.8 billion – more than double the £39 billion at the end of 2003.

Latest research from Mintel indicates that by 2010, one million extra people in the UK will have purchased a second home as an investment, this will take the number of landlords to around 2 million.

There are many explanations for this, for many young adults, there is no other choice but to rent, it is also becoming more socially acceptable to rent.

Buy-to-let can be seen as a long-term investment and many see their second home as their retirement fund. Some also find this kind of investment helps future university fees or assists their children onto the property ladder.

In terms of finding the right mortgage, it seems most lenders are likely to focus on establishing the most competitive mortgage deal rather than finding out what is motivating the property investment and what are the potential exposures. With this in mind, it is advised that all landlords and future landlords should consider the types of insurance they may need such as term assurance, income protection and critical illness cover – these are all significant and can provide necessary safeguards.

Landlords could be gambling with their future income if they are stretching themselves and at risk of rising interest rates.