There has been an enormous amount of adverse coverage within the media in recent months regarding the security of the buy-to-let market. This has triggered alarm bells in the minds of a number of buy-to-let customers.
As the housing market booms, concerns are growing that house prices are soaring at a faster rate than rental yields, causing apprehension regarding the affordability and monthly return of many buy-to let investments. So what can you do to reassure your buy-to-let clients during this uncertain time?
The key must be for you to help minimise your client’s risks as much as possible. You could do this by:
l Encouraging your clients to consider the location of the property carefully, taking advice from local letting agencies to ensure the property is in an area where demand exceeds supply for rented property.
l Recommending a mortgage product that matches your client’s personal risk profile. For example, a variable rate mortgage without extended or early repayment charges for a client who wants to capitalise on the current low interest rate environment, or who wants the option of leaving the buy-to-let market if their circumstances change. Or a five-year fixed rate if the client is confident about their investment and wants to secure the amount they will pay each month.
l Advising your client to take legal advice for setting up an assured shorthold tenancy agreement, accounting advice for producing annual letting accounts and letting advice on how to find and choose a tenant.
The nature of the buy-to-let market does not provide a totally risk-free investment opportunity, however your advice and careful research by your client can help to minimise these risks.
Leading buy-to-let lenders believe buy-to-let investments should be for the medium to long term to maximise returns and to minimise risks. To make it easier for borrowers to do this, some lenders are improving their buy-to-let products for people who already have a buy-to-let mortgage.
Buy to let can be an exciting and rewarding investment providing the customer is fully aware of the nature of the market, including all of its risks. If undertaken for the long term, the buy-to-let market has the potential to provide outstanding returns and with the current buoyant housing market and low interest rates, many are already reaping the rewards of their buy-to-let market investments.
Neena Kithoray is senior product manager of Bristol & West Mortgages