The most recent data released from Paragon has revealed that gearing amongst landlords remained at a low level during Q1 2017.
Data shows that the average loan-to-value ratio decreased by 2% to 35%.
Paragon’s report shows that 68% of landlords now have borrowings of less than half of the value of their investment. Since the second quarter of 2012, average gearing has fallen substantially, suggesting the private rental sector has been de-leveraging for some time.
On average, landlords spend 30% of their rental income on mortgage payments. 43% of respondents said that they spend less than a quarter.
Despite buying intentions remain subdued, there has been no big-scale sell off by buy-to-let landlords of their investment properties. On average, the landlords quizzed had 13 properties in their portfolio, with the majority not planning to add to this number in the next year.
In terms of value, the average of an investment portfolio is £1.7m following a rise in the final quarter of 2016. 25% of landlords feel this figure will increase in the next year, while just 8% feel it will decrease.
John Heron, Managing Director at Paragon Mortgages, noted: ‘Average gearing is low and getting low and this long-term de-leveraging demonstrates just how financially conservative buy-to-let landlords are. Looking ahead, it’s realistic to expect this downward drift in gearing to continue as the PRA’s new buy-to-let underwriting standards take effect.’
‘Our PRS Trends Report indicates a resilient sector in Q1 2017 but, as the mortgage interest rate tax changes filter through between now and 2021, landlord confidence may be eroded further which could well result in a reduction in the supply of property to the sector and, in turn, higher rents,’ he added.