The successive increases in interest rates from the Bank of England are expected to discourage many aspiring first time buyers from getting onto the housing ladder, but will have a much more positive impact on hundreds of thousands of buy-to-let landlords who provide rented accommodation to those who are unable or unwilling to purchase their own home.
The January Buy-To-Let Index from Paragon Mortgages reveals that rental yields achieved by residential investors have remained steady at 6% for the past eight months. The New Year has started on a positive trend, and the buy-to-let market is set to remain strong as rising interest rates put increasing pressure on hard-pressed first time buyers.
John Heron, managing director of Paragon Mortgages, says: "The private rented sector fills a key role in the housing market by providing decent, affordable accommodation for a growing number of households. In particular, people who need flexibility before they settle down or who are unable to afford to purchase their own home tend to resort to privately rented accommodation. With high property prices and rising borrowing costs, more and more would-be home owners will choose to live in rented homes for longer while they save a large enough deposit."
According to Paragon Mortgages' research, tenant demand is at its strongest level ever since the survey began - 32% of landlords say that tenant demand is growing or surging. Unsurprisingly, many of these landlords are actively growing their portfolios to meet this increase in demand, and they plan to expand their holdings by an average of 2.6% over the next 12 months. Rental yields will remain stable or possibly edge up, with landlords expecting them to stand at 6.1% in a year's time.
