Where are the best residential investments in Britain?

Industry Insight May 21st, 2015
Where are the best residential investments in Britain?

Where in Britain would yield in residential investments become a problem in the avent of a rate rises

Residential investments yields have dropped to record lows in recent years especially in the South and other costly areas. It leaves some landlords – particularly those who have bought recently and borrowed the typical maximum of 75pc of the price – vulnerable to even modest rate increases.

Lets look at residential investments in parts of the country. The numbers shown are based on monthly cost of servicing an interest-only mortgage of 75pc of the property value at a rate of 3pc. What happens when rates go to 5.5%. The figures below are based on average properties and average rents, while many landlords can be assumed to have made investments where yields are higher.

North East

  • Average Value: £151,600
  • Average rent:£519.00
  • Current Mortgage:£284.00
  • Future Mortgage:£521.00

North West

  • Average Value: £167,200
  • Average rent:£594.00
  • Current Mortgage:£314.00
  • Future Mortgage:£575.00

East Midlands

  • Average Value: £179,700
  • Average rent:£566.00
  • Current Mortgage:£337.00
  • Future Mortgage:£618.00

Yorks & Humber

  • Average Value: £168,600
  • Average rent:£547.00
  • Current Mortgage:£316.00
  • Future Mortgage:£580.00

South West

  • Average Value: £245,400
  • Average rent:£665.00
  • Current Mortgage:£460.00
  • Future Mortgage:£844.00

East Anglia

  • Average Value: £231,600
  • Average rent:£807.00
  • Current Mortgage:£434.00
  • Future Mortgage:£796.00

In residential investments lenders typically want rental income to be 125pc of the mortgage costs which means as rates rise and rent don`t some landlords may find themselves in breach which may require them to put in more captial to bring them back in line with the 125pc.

Rates will rise at some point at which point some buy-to-let investors may find their cashflow turns negative. It certainly feel that rates could be the prick that bursts the bubble and cause landlords to sell.

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