Interest rates shrink, but buy-to-let optimism grows

This beautifully furnished flat for sale in Westminster is an ideal buy-to-let investment

When the high street bank Santander recently announced its intention to make a 50% cut in its current account interest rates, you could almost hear the collective groan from savers up and down the country.

From 1st November this year, savers with balances of up to £20,000 invested in the bank’s popular 123 current account will see the rate cut from 3% to 1.5%. Of course, Santander is not the only bank to reduce its interest rates. Even before the referendum, our financial institutions were shrinking once-healthy savings rates to eye-wateringly low levels, and post-Brexit, there are even whispers that rates will slide towards zero in early 2017.

During the past year, an increase in stamp duty has combined with the cut in tax relief on buy-to-let mortgages to create a few more challenges for would-be investors, but as interest rates shrink still further, savers may consider that the potential return on a rental property is a more attractive option than leaving money in a zero-rated savings account.

At the moment there is a ‘perfect storm’ of circumstances directing investors towards buy-to-let. This includes a shortage of rental properties, mortgage rates at record lows and a resurgent property market that promises a strong return on your investment when it’s time to sell.

With average Central London rental yields currently estimated at between 2.2 and 4 per cent, it’s no wonder that more and more savers are drawn towards a buy-to-let, rather than risking their savings on a volatile stock market. But what about the long term prospects for your investment? Interest rates will be unlikely to rise for some time, but should mortgage costs rise in future, any increases should be offset by rents that will rise with inflation.

At Daniel Cobb, we are often asked for advice from clients who are considering a buy to let investment. As a trusted London estate agent, handling both property sales and lettings, our clients know that we understand both sides of the market. This allows us to guide you to properties for sale in London that are not only desirable to prospective tenants, but also provide excellent investment opportunities.

Darren Devlin from our Westminster Sales Department advises: “While investors would be wise to plan their finances carefully in the current economic climate, we believe that there is still great potential in the buy-to-let market. There has been some uncertainty over the summer following the Brexit vote, but the pace of property sales is likely to pick up sharply in September. Buyers who move quickly and have finances in place will get the best deals.”

Whether you are looking for a studio apartment or family house for sale in London, we can help with every detail, from the purchase right through to letting your property. If corporate lettings are on your agenda, read What you need to know about corporate lettings for advice on the best areas to invest in buy-to-let property etc.  When your tenants are in place we can provide peace of mind with our property management service, which is designed to relieve many of the responsibilities and admin headaches involved in becoming a landlord. Just give us a call and we’ll take it from there.