Are you dreaming of spending your pension pot on a Lamborghini, as the Pensions Minister suggests, or are you more drawn to bricks and mortar? Well, the buy-to-let (BTL) market appears to be readying itself for a new wave of interest by introducing record low rates – just in case you are interested.
We are fast approaching the April deadline that allows those aged 55 and over to take their pension pot as a cash lump sum. The responsibility for how the money is used then transfers to the account holder. However, advice will be required on the tax implications as well as the longevity of the money; after all, this is a once-only sum of money, which has taken years and years to acquire, and one ill-considered decision may have repercussions that last a lifetime. If this sounds scary, then good; sometimes it is wise to be scared.
While a Lamborghini may be an exciting purchase, it is also a high risk investment that depreciates in value instead of increasing or providing an income. BTL, on the other hand, though not as flash, has the potential for both growth and income.
Costs of borrowing for BTL are also falling. Each month Moneyfacts analyses not just the products but also what is happening across the sector, and the average rate charged on both variable and fixed BTL mortgages has recently fallen to record lows.
Across a combination of terms and loan-to-values (LTV), the average fixed rate BTL is currently just 3.85% and the number of deals on offer has risen from 757 to 823 in just one month. The variable rate is even lower at 3.63%.
These changes are part of a thriving mortgage market that has seen lenders increasingly re-introduce competition across the residential sector. For instance, this time last year there were 2,662 residential deals for borrowers looking for LTVs ranging from 100% to 75%, but today the number has increased to 2,943.