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Is it time to invest in buy to let

Paystream News

Tony Harris - MD Contractor Financials

Thursday 12th Sep, 2013

More Contractors are investing in buy to let now than at any point in the last five years. Recent figures are showing that buy to let is representing 13.3% of all mortgage lending, with lending on buy to let now 31% higher than at the same time last year according to the Council of Mortgage Lenders.

Improved conditions in funding markets and the Bank of England's forward guidance announcement last month have led to greater confidence amongst Contractors. The news that the base rate is likely to stay at 0.5% until the unemployment rate reaches 7% which is not expected to be until 2016, is reassuring homeowners and investors that their mortgages will remain low for the foreseeable future.

An investment for the future

Buy to let has steadily grown in popularity over the past ten years, and with so many great affordable mortgages out there, many Contractors are finding that they can get better returns on their investment in property than they can earn from their high street savings account. Instead of simply focussing on building a property portfolio to provide an income for today, many Contractors are thinking of the long term potential in property investment. A buy to let property could help to supplement your pension income in retirement, or could be sold to fund a child through University, or even to help your children get a deposit together for their first home.

Whether you want to add to your portfolio of properties or are just starting off with your first purchase, as long as you have a deposit of 25% or higher you could secure a competitive buy to let mortgage. It is important to bear in mind that like any investment, the market is changeable and a degree of risk is involved, but returns at current rates are far exceeding the interest you can earn on a high street savings account at the moment.

Tailor your search to your potential tenants

A recent report discovered that Birmingham is the area currently offering the best returns for investors with an average return of 10.6%, with Kent offering 10.5% and Cardiff 7.5%. Surprisingly London offered the lowest return on investment at around 4% on average across the city despite being one of the most competitive rental markets but this is largely due to the expense of purchasing a property in the capital.

When looking at potential investment properties it is very important to bear in mind where you are planning on buying and the kind of tenants you are aiming to attract. For example if you are planning to attract a professional couple, it would be wise to think about local transport links, are there any good restaurants and bars in the area, and the style of the property. If you are aiming for the family market then you should think about its proximity to local schools and whether it has a garden and off street parking.

A buy to let mortgage is calculated on the rental yield of the property, this will need to be 125% of the annual mortgage repayments so the lender knows that the repayments will be covered by your tenants. Therefore the higher the potential rent in proportion to the property value, the lower risk you pose and the more likely you are to secure lending.

Buy to let mortgage rates

Thanks to 'Funding for Lending' and the historically low base rate, there are some great deals available on buy to let mortgages at the moment. One that has attracted many Contractors is a two year fixed rate with Clydesdale at 3.89%, there is no arrangement fee involved and only a 25% deposit is required.

Organising your buy to let mortgage as a Contractor couldn't be easier as all that is required to get the application underway is two forms of ID, recent bank statements, a copy of your current contract and a bill with your current address on. The Advisers at Contractor Financials will have the whole process sewn up within 4 to 8 weeks, and will handle everything via email, phone and post so you get all the benefits of a buy to let investment with none of the hassle. Best of all, they charge PayStream clients none of the usual broker fees for their expert advice, meaning you could save over £500.

If you would like to speak with one of the award winning advisers at Contractor Financials, please call 0845 062 8888 or email

This article was written by Tony Harris the MD of our IFA partners, Contractor Financials.

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