Landlord Borrowing is at an All-Time Low

The days of high gearing are long gone. Data published in the latest Private Rental Sector report by Paragon indicates that landlords are reducing their mortgage borrowing to accommodate the latest buy to let changes. Paragon figures indicate that the average loan to value for investment portfolios was 35% at the end of 2017. This is significantly lower than previous years, so it’s clear that the loss of mortgage interest tax relief is having an effect on how landlords finance their investment portfolios.

Interest Rates Predicted to Rise
Many experts are predicting that mortgage interest rates will rise in the next 2-3 years. When questioned, 51% of landlords said mortgage interest rates did not influence their decision on whether to sell any of their properties. However, 49% of landlords said they would sell up if interest rates hit.

John Heron from Paragon Mortgages says: “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.

High Gearing Obsolete
High gearing has enabled some landlords to build huge investment portfolios, but the practice is no longer as attractive. Not only are interest rates predicted to rise, but it is now much harder to obtain mortgage finance and some landlords could be in for a rude shock when their current mortgage deals come to an end in the next few months.

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