Nottingham and Liverpool have been named the best places for buy-to-let investors in the current climate, with figures showing rental yields in the UK’s hot spots have risen by 0.9 percentage points on average.
The figures, from mortgage broker Private Finance, showed the average net rental yield in Liverpool and Nottingham is now 6.2 per cent, excluding tax. Other top spots include Cardiff, Southhampton, Manchester, Coventry and Edinburgh.
Shaun Church, director of Private Finance, said landlords had been helped by falling mortgage rates, despite suffering from other challenges.
“With house prices on the rise, too large a loan can negate any savings made from low rates, so landlords need to consider all aspects of their mortgage,” he said.
He added finding the right buy-to-let location was “a careful balancing act”.
“Too large an initial investment makes it difficult to achieve a healthy yield, but landlords must also be confident that property values will appreciate at a higher rate than mortgage borrowing to achieve a long-term profit.,” he said.
“Strong rental demand is also key to prevent lengthy void periods that can damage affordability. While there has been some movement in the top 10 buy-to-let hotspots, larger cities and university towns tend to offer the greatest opportunity for investors as they offer the highest rental demand.”
The figures showed the average interest-only mortgage costs in some buy-to-let hotspots had fallen between May 2017 and January 2018.
These included Cardiff, where the average mortgage cost was £3,680 a year now, compared with £3,811 a year ago, and Southampton, where the average had fallen by £103 to £3,896.
“Though the buy-to-let sector is facing many challenges, one area where landlords have benefited is falling mortgage rates," Mr Church said.
He said seeking independent advice is becoming increasingly important for landlords to find and be accepted for the best deals.
"There are particular challenges for portfolio landlords, classed by the Prudential Regulation Authority (PRA) as those with four or more buy-to-let properties.
"These landlords now face much more stringent affordability tests and must demonstrate the profitability of their entire portfolio to be accepted for a loan."
