Many property investment specialists in Britain believe that the residential property market is well on the road to recovery and considering that the last major crisis took place some twenty years ago…

Many real estate specialists in Britain believe that the residential property market is well on the road to recovery and considering that the last major crisis took place some twenty years ago, during the early 1990s, investors looking to purchase houses or flats can expect more than a decade of relative growth. Additionally, the number of tenants looking to rent homes in the UK remains high, especially as it becomes more common to live in a rental property for an extended period of time, making the buy-to-let sector an especially inviting investment opportunity.

But one of the best ways to ensure success as a new residential landlord or buy-to-let investor is to apply for a fixed-rate loan, as interests still remain low. This is a particularly good option for those landlords or investors who have enough money to put down the relatively large deposits required for the best deals. For example, landlords who are able to put down a 40% deposit on their new property can enjoy an initial interest rate of 2.99%, if they receive a loan from the Mortgage Works. This rate will remain in effect until May 2011, after which landlords with these buy-to-let loans would pay approximately 4.99%.

An analysis in The Press and Journal noted that the Bank of China offers British buy-to-let investors loans amounting to 65% of their property’s value, at a tracker rate of 3.88%. Landlords should, however, keep in mind that the Bank of China does charge a special arrangement fee, on top of the interest.

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The Council of Mortgage Lenders (CML) statistics for February show that Gross Mortgage lending increased by 6% on January figures. Somewhat unusual as February is the shortest month – but not a surpise due to the poor January figures attributed to the weather and end of the stamp duty holiday.

In marked contrast the stats show a fall of 6% against lending in February 2009. However the combined figures for the start of the year were broadly as forcast by the CML.

“As we look forward, we expect emerging signs of improvement as confidence in the economy grows and we move past the election” remarked CML economist Paul Samter.

“With activity unlikely to pick up much in the short term, we would expect to see further modest volatility in the coming months.”

Recent house price data from lenders suggests that property values dipped in February.

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Nationwide today announced a 0.7% increase in House Prices during March, as compared to February. This revered the decline in prices seen in February but also confirms the slowing of the price rises seen during 2009.

Nationwide is the first major organisation to announce House Price figures for March. Their smoother and less volatile three month on three month percentage showed a slight slowdown from 1.8% to 1.6%. Compared to last year figures were 9% higher, though this is down from 9.2% from last month.

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Typical rents have risen by 3.2% in the last 12 months, roughly in line with inflation.

According to the latest buy-to-let index from LSL Property Services, rents increased by 0.3% in February to an average of £658 a month.

The index revealed that yields rose to an average 4.8% and the total return from investing in buy-to-let over the last year increased to 10.6%, despite February’s slight drop in house prices.

That is the highest return recorded in the last two years. However, there are large regional variations.

The index shows that the North is lagging far behind the South, with southern areas “storming ahead” as northern ones languished.

LSL spokesman, David Brown, said the disparity in returns was more a symptom of rising property values than rapid rent increases, while the picture on rents has been much more mixed with no particular regional pattern emerging.

He says: “The recovery in the South began much more quickly than in the North – the ripples from the housing downturn are still affecting the market in the North, whereas the South has been enjoying a new wave of optimism over the last year.

“We would expect returns to improve in the North as the recovery in the South spreads out, but it may lag behind for a few months yet.”

LSL predicts that new entrants to the buy-to-let market would make an annual return of 8.5% (or £14,000 on a typical property) over the next 12 months.

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There are currently 70% more mortgage deals on offer than there were at the market's nadir last April.

According to data website Moneyfacts, at the height of the mortgage drought on April 1st there were just 1,209 products out there, compared to over 13,000 before the credit crisis hit in 2007.

Today there are 2,053 deals on offer – a 70% increase since last April and a 28% increase since the start of this year alone.

Moneyfacts says that the types of mortgage products which have seen the biggest percentage change are the higher loan-to-value deals, as lenders continue to relax their credit criteria.

Michelle Slade, spokesperson for Moneyfacts.co.uk said:

“By increasing the numbers of mortgages, lenders are showing that they are open for business.

“Increased availability brings increased competition and the mortgage market is finally seeing some of the most competitive deals of the last few years.

“Lenders are becoming more accommodating with their lending criteria, which bodes well for increasing the competitiveness of the mortgage market.

“It is pleasing to see that the average mortgage rate continues to fall, while at the same time deposit requirements are easing.

“House prices appear to have bottomed out, meaning higher LTV mortgages are a less risky option for lenders.

“For a long time, borrowers with a small deposit have had few options. Many will be hoping the positive trend continues, with increased competition reducing the cost of high LTV mortgages.

“Only then will first-time buyers, many of whom are currently priced out of the market, be able to return.”

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