Britain’s biggest property listings website today said investors were piling into buy-to-let for “blindingly good returns” after the government’s efforts to bolster lending had created an “arbitrage of immediate return”.
In a report in today’s Telegraph newspaper, Rightmove said its research showed that rents were now delivering average gross yields of 5.9 per cent but as mortgages were available from as little as 2pc for a two-year fixed-rate and 2.7pc for a five-year deal, there was “the possibility of a straight arbitrage of immediate return on money borrowed against your main residence”.
The Government’s Funding for Lending Scheme (FLS), launched last summer, has offered £80bn of loans to banks at rates as low as 0.25pc. This has helped pushed down mortgage – and savings – best buy deals.
Miles Shipside, a director at Rightmove, said: “There are blindingly good returns on the right buy-to-let investment, with the Funding for Lending Scheme giving the possibility of an immediate and enticing profit gap between borrowing costs and available rental returns.
“With the prospect of capital growth in future years if you buy the right property, you can see why investors are piling in to the rental market – why wouldn’t they when it can offer a much better return than money in the bank?”
Lenders normally require borrowers to have a buy-let-mortgages, which comes with higher rates than residential mortgages.
The number of Britons with buy-to-let mortgages has soared in recent years, to nearly 1.5 million, with savers facing record low interest rates turning to alternative assets for income.
Rightmove also said sellers had lifted asking prices on homes by 1.7pc in the past month, in a further sign of confidence for the property market in 2013.
The rise, to an average £239,710, exceeded the previous record high for March, in 2008.
Homes are also shifting more quickly with the average time on the market now 80 days compared to 90 this time last year.See full Telegraph article here