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Recent investors
using buy-to-let as a pension have been warned that they risk a
possible 90 per cent capital loss if they borrowed 90 per cent of
their property value.
Hargreaves Lansdown has produced a report on the risks and rewards
of using buy-to-let as a means of retirement income, noting that
183,000 buy-to-let mortgages were taken out in 2007, equating to
18 per cent of all outstanding buy-to-let mortgages.
The firm says that property investors face premature selling up
because interest payments may become unaffordable, and has held
up the Council of Mortgage Lenders’ information that almost
10,000 buy-to-let mortgages are now more than three months in arrears
as evidence of their predicted trend.
Laith Khalaf, a pensions analyst with Hargreaves Lansdown, said
that borrowing to invest could be a hazardous strategy.
“This was as true ten years ago as it is today, and will be
in ten years time when everyone has forgotten the current credit
crisis. For the overwhelming majority, buy-to-let should not be
seen as an alternative to making regular savings into a pension.”
- Pensions
Age August 2008
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