There has been sizable growth or a 35 per cent increase - in the number of older people buying up student rental properties to boost retirement income, according to new research.
Along with banks and mortgage brokers, The Mistoria Group has seen an upsurge in buyers in their fifties and sixties taking out buy-to-let mortgages on student properties, as a number of institutions scrap upper age limits for borrowers.
This growth in silver landlords is being driven by low-cost mortgage rates and reforms from Chancellor George Osborne that allows savers to take all their pension cash at retirement. Instead of having to buy an annuity, or income for life, pensioners can use their cash as they like from next April. Living off rental income will help to improve their lifestyles in retirement, boosted by the fact that an average buy-to-let property returns around 5.1 per cent in the current market.
Banks are handing out more than £2 billion a month in buy-to-let deals a rise of 60 per cent more than last year, according to the Council of Mortgage Lenders.
However, lessons from the recent past are still fresh in peoples minds. From Black Friday on the stock market and the Icelandic bank crash to the Lloyds and RBS scandals and the retirement age being raised to compensate for underperforming pensions, there is cause for caution.
With the change in age restrictions on mortgages, many older landlords can now borrow funds to finance their purchase, with a view to building up an income-producing portfolio for their children, instead of leaving them cash.
Property in the UK has historically been a safe investment and although house prices occasionally go down on a year on year basis, they never decline over a seven to ten year cycle. Regardless of capital appreciation, rental income has always gone up, ensuring a better yield, year after year.
Property investors hoping to join the buy-to-let boom should look to university towns beyond London to find the best returns, according to another study. As more investors are tempted by cheap buy-to-let mortgages, the market can become saturated, so it is important to choose the location wisely. London is most popular for landlords, but generates a surprisingly low yield of 5.7 per cent because house prices are so high, according to mortgage lender Landlord Centre.The best yields were reported in Leeds at 7.6 per cent, Liverpool at 7.4 per cent and Nottingham at seven per cent, where house prices are lower but rents still healthy.
Recent estimates from estate agent Savills suggest the Chancellors reforms could see an extra £10 billion annual boost, if just one in five well-off pensioners decides to invest 10 per cent of their pension pots in buy-to-let.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.
Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.
MEDIA CONTACT: Marie Carter on 01325 363 436.
Notes to editors:
Latimer Hinks solicitors, based in Darlington, has a team of around 40 people serving private and corporate clients. Their range of expertise and services covers legal issues surrounding commercial, residential and agricultural property, wills and lasting powers of attorney, trusts, probate, long-term care, tax planning, commercial law, alternative and renewable energy, property and disputes, business rescue, employment, and land-owning.