Buy-to-let unaffected by rate rise says report

Posted: 26 Oct 2006 10:52:13 GMT

Enthusiasm for new investment in the buy-to-let market remains undimmed, despite concerns that affordability is cutting rental yields and dampening the market generally

Enthusiasm for new investment in the buy-to-let market remains undimmed, despite concerns that affordability is cutting rental yields and dampening the market generally.

A Paragon Mortgage report said that activity in the buy-to-let market has not been affected by August's rate rise, with investor activity consistently stable.

"With the number of buy-to-let tenancies forecast to grow by 20,000-30,000 annually over the next ten years, landlords are positioning themselves to meet demand," said Nigel Terrington of Paragon Mortgages.

"Gross rental yields have been consistently in excess of six per cent this year and this month overall returns average in excess of ten per cent on an ungeared basis.

"This kind of return compares very favourably with other forms of investment, such as equities, cash deposits or fixed income securities.

"In fact, most landlords achieve significantly stronger returns by gearing up their investment portfolios, using mortgage finance to purchase properties."

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