Buy-to-let landlords cashing in on rising rental yields


Updated on 09 August 2012 | 19 Comments

Buy-to-let landlords are cashing in on rising rental yields. But the north-south divide is widening.

Buy-to-let landlords have seen gross annual rental income increase to an average 6.2% compared to 6.0% last year, according to research from BM Solutions.

The rise has been at least partly attributed to a 5.3% growth in average rents across Britain over the last year.

The best returns were found in the north with an average 7% annual rental yield for landlords. London saw the lowest return for investors at just 4.8%. In fact southern England experienced the worst yields overall.

In general, landlords in the north saw a greater return on their buy-to-let investments than those in the South. That’s despite rents typically being lower in the north.

Rent rises

The average rent has gone up 5.3% from £697 last year, to an average of £734 in June this year. As usual there has been significant variation in the rental growth and prices between regions.

The biggest increase was seen in London with a 10.5% rise in rents. The south east has seen the second largest increase of 6.2% compared to last year, followed by Wales at 5.8%. Yet rents in the south west have shown little movement with growth measured at just 0.2%.

The north was the only place to see a drop, falling by 0.4%.

Tenants in London face the largest average rent at £1,287 per month, which is 75% more than what the rest of the country pays!

South east tenants are faced with the second highest rents with the average measured at £885 per month. The lowest average rents can be found in in the north (£477 per month), Yorkshire and Humber (£484 per month) and Wales (£490 per month).

Lucrative investment

Despite the regional variations the figures show it is still lucrative to be a buy-to-let investor at the moment. Increasing rental demand as first-time buyers are priced out of the market means buy-to-let investors are profiting.

That may be why the total buy-to-let lending jumped in the second quarter of 2012. Figures from the Council of Mortgage Lenders revealed that year-on-year the volume of buy-to-let loans is up 14% while the value of those loans has jumped 18%.

Buy-to-let mortgages round up

Here is a roundup of a few fixed and tracker buy-to-let mortgages available at the moment.

Lender

Deal

Rate

Fee

Max LTV

HSBC

Lifetime tracker

3.79% (tracks base rate + 3.29%)

£1,499

65%

Barclays

Two-year fixed

3.88%

£3,999

60%

The Nottingham BS

Two-year tracker

4.19% (tracks base rate + 3.69%)

£1,999

75%

Cheltenham & Gloucester

Two-year tracker

4.49% (tracks base rate + 3.99%)

£995

60%

National Counties BS

Fixed to 31/03/2015

4.69%

£995

70%

HSBC

Two-year fixed

4.79%

£1,499

75%

Skipton BS

Five-year fixed

5.39%

£1,495

75%

Coventry BS

Lifetime tracker

5.79% (tracks base rate + 5.29%)

£999

75%

Leeds BS

Three-year fixed

5.99%

£1,498

80%

Principality BS

Two-year tracker

5.99% (tracks base rate + 5.49%)

£999

75%

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage

More stories on buy-to-let:

Buy to let doesn't add up

Top new buy-to-let mortgages launched

Buy to let: confident landlords expanding portfolios

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