According to the UK’s biggest property website, Rightmove, property investors are flooding into the private rental market to make the most of the great returns on their money. And with the average gross rental yield at 5.9%, who can blame them?
Dismal interest rates for savers
Interest rates on savings accounts are currently terrible. Many high street savings accounts are paying little more than 1%, so you may as well keep your cash stashed in a suitcase under the bed. But whilst the interest on savings accounts is low, so are the interest rates on mortgages, which can work in your favour if you want to spend money to make money.
Remortgage and release some equity
Many investors are seeing the potential in borrowing money against their current home and reinvesting it in a buy to let property. When you are paying a mortgage rate of 2% on a cheap fixed rate deal, it makes financial sense to invest that cash in a rental property and enjoy a return of nearer 6%.
Cheap mortgages available for investors
The government’s Funding for Lending Scheme (FLS) has helped push down mortgage interest rates to an all-time low. Last summer, the government made more than £80 billion of loans available to lenders at a rock bottom rate of 0.25%, in an attempt to boost the stagnant property market. Whilst this influx of cash caused savings interest rates to fall even further, it has certainly helped improve the availability of cheap mortgages to borrowers. So if you have been sitting on the fence up until now, start making plans because it is currently an excellent time to invest.
