Is Burton buy-to-let property in crisis?

Derby and Burton landlords… sell your property portfolios, your tenants will soon be leaving in droves as they buy their first home with the new 5% deposit mortgages backed by the Government’s new mortgage-guarantee scheme revealed in March’s budget!

These 95% mortgages are to be supported by the Treasury, lessening losses for mortgage lenders should the borrower be incapable of repaying and get repossessed, as the Government want Generation Rent to turn into Generation Buy.

I know I sound like the Grim Reaper announcing the death knell for buy-to-let investment as many tenants will soon be buying their first home – but is it really that bad?

It’s true that on first impressions it might look like many first-time buyers will now be leaving their rental properties in their droves with this new low deposit mortgage scheme. However, these potential first-time buyers are facing four big issues which will inhibit their ability to take advantage of the mortgage scheme, meaning many will continue to rent.


Mortgage Rates

Firstly, the mortgage rate for 95% mortgages has increased.

The lowest five-year fixed-rate mortgage with a 5% deposit at the time of writing (with Barclays) is 3.45%, up from 2019’s best rate of 2.75%. That doesn’t sound a lot, yet it makes a massive difference to the monthly mortgage payments (as you will see below).


Demand and Stamp Duty

Secondly, due to pent-up demand post lockdown and the stamp duty holiday, this has increased demand for local property, placing upward pressure on property prices which has made it problematic for first-time buyers to get on the  property ladder. For example in Burton-on-Trent, this has meant that the average price of a Burton first-time buyer property has risen from £151,518 to £180,350 in the last 12 months.

In turn, this means that Burton first-time buyers have had to save an additional £1,441.60 for their deposit to keep up with the house price increase. That means the monthly payment on a 30-year mortgage for a Burton first-time buyer has jumped from £587.63 per month in 2019 to £764.59 a month today, an increase of £176.95 per month.


Rental Supply and Demand

The third issue is demand for Burton first-time property from buy-to-let landlords is surpassing supply, adding further fuel to the fire of driving up prices.


Increased Risk

Finally, the fact that most first-time buyers are of the younger generation and it’s the younger workers that have been most at risk of unemployment or salary cuts during the economic crisis.


5 Year Fixed Rate – 20195 Year Fixed Rate – 2021
Purchase Price£151,518£180,350
5% Deposit Required£7,576£9,018
95% Mortgage Borrowed £143,942£171,333
Annual Interest Rate2.75%3.45%
Mortgage Length (in years)3030
Mortgage Payment per Month£587.63£764.59
Sum of Mortgage Payments over whole mortgage term£211,547£275,251
Total Interest Cost over the whole mortgage term£67,605£103,918


You might say things will change in 2022, but would it surprise you that 95% mortgages have been available to first-time buyers since the summer of 2010 and were only withdrawn during the first lockdown in 2020?

Since 2010, even with ultra-low interest rates, the number of private rented properties in the UK has grown by 580,000 households from 3.8m households to 4.4m households and will continue to grow, let me explain why.

The notion that buy-to-let property is a strong long-term investment has not altered with the pandemic. Since 1930 with the all the crises we have had with WW2, the Oil Crisis, 3-day week and hyper-inflation in the 1970’s, property has been a hedge against inflation and in addition, delivers a decent income yield of 5% and upwards. Not bad when compared to the 0.5% with a savings account (if you are lucky!).


It is a fact that those landlords that see buy-to-let investment as a long-term strategy will win.


It is certainly the case that we are starting to see an exodus of the ‘amateur landlord’, leaving more professional landlords who see ‘landlord-ing’ as a business, not a game. Those long-term landlords can see through the present predicament as they have a long-term buy-to-let investment mindset.

Many Derby and Burton landlords are intensely aware that demand for high quality private rental properties in is only going to flourish as a consequence of the pandemic; whilst not forgetting that demand presently exceeds supply. Also, those same landlords know that a responsible approach to their tenants with regard to condition and repairs, is a key to ensuring the rent keeps flowing in with minimal void periods.


Finally, even though Burton-on-Trent house prices are, on average, on the up, there are still some bargains even in this market. By doing their homework and working with an agent like Professional Properties, these savvy landlords are paying reasonable prices, thus giving them a sturdier rental yield and the ability for future capital growth.

If you are a Burton-on-Trent landlord, as our clients all know, our team is here to help and guide landlords on their long-term investment strategy.

I therefore extend this offer to all Burton-on-Trent landlords, irrespective of whether you manage your property yourself or use one of my respected competitor agents in Burton-on-Trent, we are here to help.  

Please contact our team on 01332 300172.