OAP property boom: One in 12 over-60s owns second home as 'grey savers' buy-to-let
09-15-2014
- 'Grey pound' has helped push up the number of loans for rental properties
- The number has soared by 58 per cent in less than two years
- Over-60s own a quarter of the nation’s £4.01trillion property wealth
By Victoria Bischoff for The Daily Mail
The grey pound has helped push up the number of loans for rental properties, according to official figures. File picture
Savers in their sixties are driving a buy-to-let boom by investing their nest eggs into bricks and mortar in the hope of rich rewards.
The ‘grey pound’ has helped push up the number of loans for rental properties, according to official figures.
The figure has soared by 58 per cent in less than two years and by 17 per cent in just the last month, said the Council of Mortgage Lenders.
Older savers have been badly hit by poor returns as interest rates remain low. In contrast, rents have increased and rates on buy-to-let mortgages have fallen.
Other research from insurer LV= reveals that one in 12 Britons aged over 60 now own a second home.
This age group owns a quarter of the nation’s £4.01trillion property wealth, equivalent to an estimated value of £993billion.
Peter Gettins, of mortgage broker London & Country, said: ‘These figures mirror what we have seen with more amateur landlords jumping on the buy-to-let bandwagon.’
Ray Boulger, of mortgage experts John Charcol, said: ‘Buy to let is a very attractive proposition for many savers when they sit down and do the sums.
‘And interest is only going to rise, particularly when new pension rules allow more retirees to access the cash in their retirement pots. It’s likely then that we’ll see even more investors start to look at buy to let.’
Buy to let was once the domain of professional property investors.
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But plummeting savings rates and poor payouts on pensions have led many older people to dabble in property and become first-time landlords.
The cost of taking out a buy-to-let mortgage has fallen. In June 2013, the average two-year rate for purchasing a property to rent out was 4.23 per cent.
Today, however, it is 3.76 per cent, according to financial data specialists Moneyfacts. Average five-year rates are also down to 4.04 per cent from 4.46 per cent.
Meanwhile, average monthly rents in England and Wales have risen 2 per cent since July 2013 to £753 a month, said LSL Property Services.
Landlords can reap a return of 5.1 per cent while the average rate on a savings account offers a miserly 0.66 per cent.
They can also see their investment rise in value as property prices head up, meaning a potential windfall if they decide to sell. Since April, those wanting to buy a home to live in themselves have faced tougher checks on their income and spending patterns.
But these stringent rules do not apply to buy-to-let mortgages. A number of banks and building societies have even made it easier to take out such a loan.
Many offer mortgages to self-employed customers, have increased the number of loans borrowers can take out and removed the upper age limit so more OAPs can invest.
Instead of having to pay off their mortgage by the age of 75, pensioners can have a buy-to-let loan until they are 85. There are now 1.57million homes in the UK with a buy-to-let mortgage and many more rental properties which are owned outright.
The figures from the CML show that 9,600 loans were taken out in July, up from 8,200 the previous month. In January 2013, the figure was only 6,060.
However, Mr Gettins sounded a note of caution. ‘But while buy to let is very much booming, my timid inner mouse is a little concerned such dramatic growth can turn into bubble-type behaviour,’ he said.