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30 August 2007

Buy-to-let market remains strong

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by Kay Mitchell

Buy-to-let market remains strong

According to Paragon, the property specialists, landlords have been buoyed by strong rental demand in spite of high interest rates and increasing property prices causing a slowdown in the mortgage market.

Over the last 3 months, rents increased by an average of 3% – a rate of 12% annually. This has allowed landlords to offset higher mortgage repayments with increasing rent yields.

During July, the average landlord property value rose by 1% and total returns on property was at 11% – the highest level since April.

A spokesperson for Paragon observed that owner occupiers are struggling under the weight of higher borrowing costs. Consequently, buy-to-let landlords can provide accommodation for the increasing number of young people who want a flexible lifestyle or who do not want to get a foot onto the property ladder yet.

According to statistics from the Council of Mortgage Lenders, 12% of all mortgages issued during the first 6 months of 2007 were in the form of buy-to-let. Further statistics from CML show that only 0.63% of buy-to-let mortgages were in arrears for more than 3 months during the first half of 2007, compared with 1.06% in the broader market.

CML remarked that landlords earn revenue on their property and can also increase rents whereas owner occupiers are unable to.

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