Buy-to-let boom may not last for ever

It used to be that taking out a buy-to-let mortgage would cost you more than your mortgage on your own home, but you can now find a mortgage cheaper for a buy-to-let than for a regular residential home loan.

Given that interest rates have been on the rise, rental yields on the downward slope and there finally appears to be a slowdown in property prices, it is strange to read the figures from the Council of Mortgage Lenders showing that landlords took out buy-to-let loans in record numbers in the first half of the year.

Just one of the pieces of bad news might be enough to deter would-be buy-to-let investors, but even all three seem unable to put people off. Instead all up to date surveys and data show that landlords are unfazed, even though they need to subsidise their buy-to-let mortgages every month.

There may, however, be some sense behind the seeming madness. There is still a shortage of houses and will be for many years to come. House prices may have slowed, but are still going up, and many would-be first-time buyers can no longer afford to buy, so they rent. Most landlords accept that they may not may big profits day-to-day, but are looking for long-term capital growth. There are few predictions of a full-on housing price crash; just a gentle flattening of the curve, which will no doubt pick up again in a year or two.

Problems do exist on a local basis. Some places are seeing an oversupply of property, and landlords in such places do struggle to find tenants, particularly for new-build flats in some towns and cities. Auction houses have said that there has been an increase in repossessions of those type of properties.

The mood in the property market is still good, but it may not last for ever.