Buy-to-let mortgages are getting more expensive

Published: November 09, 2007

It is getting more and more expensive for people to get buy-to-let mortgages, a new report has indicated.

A study by the Royal Institution of Chartered Surveyors (Rics) found that rising interest rates and levels of rental cover ratios for mortgages have made it more expensive for people to start investing in buy-to-let property.

The report found that an investor now has to pay £65,600 as a deposit on a buy-to-let mortgage on a typical house in the country. In 2002, the average buy-to-let deposit was just £10,100.

"It takes more capital than ever to set up a buy-to-let investment," explained David Stubbs, Rics senior economist.

"Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.

"However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones."

The Rics report also noted that many experts expect interest rates to come down in the new year. If this should happen, it could become cheaper to obtain buy-to-let mortgages.