LONDON, UK, November 08, 2008
/24-7PressRelease/ -- Buy-to-let investors at Young Group's myBASE1 development in Southwark completed on their purchases earlier this year, the majority taking tracker rate mortgages; many on 3 year deals tracking below the base rate, for example with Birmingham Midshires - part of HBOS - tracking 0.4 per cent below base rate, and thanks to subsequent base rate cuts, are now saving over 50 per cent on their cost of finance.
This translates to a widening in the yield gap on an average 360,000 2 bedroom apartment at the development to 2.4 per cent, providing investors with an additional 650 per month in their pocket.
"The death of buy-to-let is something that's been touted in the press for some time, but looking at the hard facts the picture is far from one of doom and gloom, and the benefits seen by investors at myBASE1 in Southwark, London are being experienced by anyone on a tracker mortgage" pointed out Neil Young, CEO of property portfolio managers Young Group.
"Providing that investors have purchased sensibly and had the right advice regarding mortgage products and projected rental income, they will weather the current economic climate. Buy-to-let is one of the world's oldest professions and has an important long term role in the housing market."
The figures:
2 bedroom apartment at myBASE1, London, SE1
Purchase price: 360,000
Loan to value: 85%
Product: Birmingham Midshires 3 year tracker
(0.4% below base rate)
Mortgage Amount: 312,120 (inc. 2% fees)
Rental income: 1,798 per calendar month
Mortgage per mth: 676 per calendar month
Gross Profit: 1,122 per calendar month
Neil Young, continues, "These numbers show there are many happy property owners, this example shows 1,122 pcm positive cashflow for well purchased investments - 650 of this is due to the base rate reducing from 5.5% to 3% over the last few months.
"However, the current issue is regarding new mortgages where we've seen lenders protect their own positions and a number of well-known high street lenders have imposed collars on their tracker deals, limiting the amount by which the mortgage holder can benefit in the event of substantial base rate reductions. We're looking very closely at the small print of products currently on offer and urge everyone to do the same to understand fully the products that they are signing up to."
Since the previous 0.5% base rate cut on 8 October, many lenders have discontinued their tracker products on the assumption that further base rate cuts are in the offing and are now only offering fixed rate products.
Indeed a number of lenders have withdrawn tracker products, only to relaunch them with higher interest rates. Abbey, now one of the UK's largest mortgage lenders following their take over of the Alliance & Leicester, raised the interest rate on their 2 year tracker products by 0.5% immediately after October's base rate cut announcement.
"The MPC clearly believes that the UK economy will benefit in the medium term from this further cut in base rate, and those on tracker mortgage will see a significant immediate benefit. I urge lenders to reflect the base rate cut in their wider mortgage products to the benefit of homeowners and investors across the board," explains Neil Young.
About Young Group
Young Group specialises in providing Property Portfolio Management services to private investors, identifying the best off-plan opportunities in London on their behalf and managing the entire investment process - from sourcing the property through to financing, furnishing and letting.
Young Group is a wealth manager with a focus on property as an asset class. Young Group owns all the property it sells, and also retains a number of properties for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion, giving investors 100% confidence that properties will 'value up' and that financing will be secured.
Young Group has transacted in excess of 1,500 apartments, with a retail value of 630m. The majority of our units are bought by clients for their private portfolios. The Group's lettings division, Young Lettings, has successfully let all investors' apartments within a week of completion.
For each property exchange, Young Group donates 50 to Children with Leukaemia, the UK's leading charity dedicated exclusively to fighting Britain's biggest childhood cancer through pioneering research, new treatment and support of children with Leukaemia and their families, and to Norwood, the Children and Families First charity which provides support to families facing social difficulties.
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