Great for Buy to Let Investors!

With lower prices and strong rental growth, buy-to-let investors could see good times continue.  Landlords expect tenant demand to continue to strengthen. Over half of landlords expect demand to increase over the next 12 months.

In September 2010, one leading company re-entered buy-to-let lending. Paragon has reported that tenant demand rose during the first quarter of 2011.

But why are buy-to-let investors again so attractive to lenders. Well, those with typical deposits of 25-40% and a proven track record in repaying mortgages, these borrowers are high on the list for the smaller amounts of money that can be lent due to lack of bank capital.  Remember, due to the banking crisis, lenders now have stricter criteria, won't lend recklessly and must keep a higher propertion of assets (cash) in their balance sheets compared to the amount of outstanding loans they have.

Chief Executive of Assetz, Stuart Law said: 'Lenders are making no secret of the fact that they would rather allocate the limited funds they do have to the lower risk option of buy-to-let loans, with deposits of 25-40%, than first-time buyers loans with 90% loan to values.

'As a result, the buy-to-let sector is recovering at a remarkable rate, as investors are drawn back by the need for a long-term, low-risk investment for their cash.

'The buy-to-let sector has not been as hard hit by the recession as people feared, due to the fact that interest rates have remained extremely low.

'This has protected landlords by giving them cashflow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases.'

Paragon Group Chief Executive, Nigel Terrington said: 'We are seeing evidence that strong tenant demand is feeding through to higher rents.

'A lack of available mortgage finance is restricting the sector's ability to expand and needs to be addressed to create a healthy and vibrant buy-to-let market in the UK.'