Landlords are reducing their borrowing levels, taking gearing to an all-time low, according to the latest PRS Trends report from Paragon.
The report is based on interviews with 201 experience landlords, and found that the average loan-to-value of investment property portfolios dropped to just 35% in the final quarter of 2017, the joint-lowest recorded in more than 15 years.
Paragon suggested that recent fiscal and regulatory changes aimed at landlords had made them less keen to take on higher loan-to-value buy-to-let mortgages.
The study revealed landlords are confident about dealing with any further increases in base rate, with more than half saying any decision to sell part of their portfolio is not dependent on mortgage interest rates.
Similarly, more than four in ten said any decision to increase rents was not down to interest rates either, while more than half said rates would not be the main factor in deciding to refinance their properties.
For the first time in more than a year the number of landlords expecting to purchase an investment property in the next quarter increased, rising from 7% in the third quarter of last year to 9% in the fourth quarter. Nonetheless, this remains well below the peak of 20%.
The number of landlords expecting to sell some or all of their buy-to-let property in the first quarter of 2018 rose 4% to 23%, the highest figure ever recorded.
John Heron, managing director of mortgages at Paragon, noted that gearing has been on a downward trend since its peak of 43% loan-to-value in 2012, adding: “In response to fiscal changes over the last two years, landlords are clearly less willing to take higher loan-to-value mortgages and borrow more, whilst regulatory changes, though welcomed by lenders, have constrained the market in its ability to offer higher LTV mortgages.
“There is no evidence to suggest lending to landlords has been anything other than sustainable. With low levels of gearing landlords appear well positioned to withstand the higher interest rates that the markets are anticipating, which is good news for buy-to-let and the wider private rented sector.”
