Jump in house prices: capital growth is returning for buy to let investors

The Nationwide Building Society’s latest house price index data shows that the cost of an average home in the UK has increased to £168,941, which is up by 4% since the beginning of this year. Prices are typically rising by around £1,000 per month (the average in January was £162,262). Consumers are becoming more confident about buying property and Government schemes to boost lending such as Help to Buy and the Funding for Lending Scheme are resulting in cheaper mortgages available at higher loan to value ratios, meaning smaller deposits are needed.

Prices in June were up by 1.9% year on year, which, whilst not exactly a boom, is the fastest rate of increase since September 2010. Homeowners will feel better at seeing these price rises – especially those who have invested in buy to let property and have not seen any significant capital growth in the last few years. Momentum is certainly building in the UK property market and, with consumer confidence being so important to the wider economy, the Government is banking on the property market to provide an economic boost.

As a buy to let investor, though, beware of the regional variations that are behind the overall rise in house prices. The Nationwide has said that the gap between London house prices and the rest of the country is the widest it has ever been. Across the UK as a whole, average house prices are down by 9% on their peak in the autumn of 2007, whereas average London property prices are up by 5%. (Northern Ireland property is worth 52% less, on average, than in autumn 2007).

House prices are expected to continue to rise, fuelled by the availability of cheap mortgages, increasing consumer confidence and lack of housing supply. There has been a massive decline in building activity since 2007 and it will take several years before the construction industry starts building enough houses to keep up with increasing demand. In the meantime, would-be first time buyers are having to use the private rental sector for their housing needs; and that is why buy to let offers an attractive opportunity for investment.

What should you do?

If you are a buy to let investor – or are thinking of entering the buy to let sector, looking for rental yield and capital growth, you need to know the best rates and the most favourable lending criteria in the mortgage market right now. Even if you are not a buy to let investor, but simply want to know the best way of financing your house move, you still want the best mortgage for you from the whole of the market, not necessarily the best mortgage that any one bank offers.

Why not contact Marchwood IFA for a chat about your options? Unlike individual high street banks and building societies, we can advise you on the right mortgage for you from the whole of the market. Finding the right mortgage product is one thing but getting a mortgage offer is altogether different. And this is where we really add value. Our sole objective is to get you what you want in the most painless way possible. When dealing with the banks this is not always straightforward, so we collect everything required from you and liaise on your behalf with the lender until the mortgage offer is produced and you can move into your new home. Whether you are buying a new home or an investment property or wish to refinance an existing mortgage, we have the skills, tools and experience to help.

Your property may be repossessed if you do not keep up repayments on your mortgage.