Published 4 November 2012 · Last reviewed 13 April 2013 · Older article — see current rates
“Saving rates are at an all-time low and unlikely to improve in the near future. So if you seek income to supplement your pension why not turn to investing in property?”
Fact: inflation has recently grown ahead of saving rates. Therefore if you are relying on deposits as a source of income you will have noticed that you cannot even buy as many basic household commodities as you could a few years ago. The pound just isn’t stretching and in reality your savings aren’t working for you. In ‘real terms’ keeping your money in the building society is actually costing you money. What’s worse is it is likely to continue until at least the next election.
Property investment has often been viewed as a medium to long term strategy, with most revenue derived from the eventual sale. However, in recent times, at Niche Advice, we have seen a sharp rise in applicants in their retirement looking to invest in property to provide a solution to much needed income.
With careful research it is conceivable to realise six to eight percent annual returns on property which is obviously far greater than deposits, and typically more immediate and dependable than the volatile equities markets.
Generally, the mortgage market has been slow to react to this new breed of purchaser. However as you come to expect from Niche we already have solutions for mortgages up to 90 years of age in place. We have numerous lenders that will take pension and annuity income when assessing a mortgage due to its guaranteed nature but we also have mortgage solutions for applicants who are earning an income but it is difficult to prove or is irregular. In fact the pivotal underwriting point is the expected rental income and how it can ‘self service’ the loan, and this is not typically a barrier at all as you would not choose a lower yielding property as the point is increase your income!
And don’t forget that the mortgage interest can be offset against the rental income, which allow could be worth 20% or 40% to you.
How do get started. Normally you need a deposit of at least twenty-five percent and an astute Mortgage Advisor, such as Niche Advice, to bring the proposition to fruition.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.