We're All Landlords Now

An era of cheap money and a booming property market has everyone looking at bricks and mortar as a means of saving for the future. Buy-to-let has been one of the success stories of the last few years and has even survived more recent wobbles in the housing market.

Two years ago economists were locked in regular debates about the fate of the UK housing market. Massive growth that had made many people very well off indeed was being branded in some quarters as unsustainable. What some called the over heating of the housing market left would be first time buyers standing as the average price of a property surged well ahead of average earnings.

The government was concerned that this rate of growth would eventually lead to what economists call a correction and what tabloid newspapers might call a meltdown. Basically, that prices would crash and homeowners who had over stretched themselves would find themselves in a negative equity trap.

Politically this could have been a disaster for Tony Blair and Gordon Brown – two men who had staked their reputations on sound management of the economy. Delivering stability has been their hallmark and something their opponents could have exploited had the bottom fallen out of the housing market.

But in the end the crash turned into a gentle slowdown. Demand for mortgages has dropped, prices have stabilised and there is less property changing hands, but there has been no apocalypse.

For many of those looking to move, the current climate appears too unstable and a bit of a risk at a time when inflationary pressures are threatening to rule out further interest rate cuts. Instead, many people are investing in upgrading their own homes as a means of making them more valuable when the market picks up again.

Others have turned to renting their properties out. A buy-to-let mortgage offers a means of investing your money in bricks and mortar without being tied to one place. It may be that where you want to live is not where you can afford to buy. Therefore if you have enough of a deposit you can get a buy-to-let deal with monthly repayments low enough to be covered by your rental income.

You will be free to rent somewhere else safe in the knowledge that you are building up equity for the future. This may be the answer for many people wanting to get onto to the property ladder but who perhaps cannot afford to buy close to their work or family commitments.

The downside is of course is that you won't be the first person to the think of doing this and that in some parts of the country competition for tenants is fierce. This has in turn pushed down rental values, which threatens the economics of the whole arrangement. You will also need to be prepared for the possibility that the property you own might not be rented 12 months of the year. This means that some kind of buffer is required to soften the blow of paying both your own rent and your mortgage for a couple of months.

Buy-to-let mortgages are now mainstream products and not just for the wealthy. Almost anyone who can get on the property ladder can consider becoming a landlord.