Buy-to-let LTVs falling

Ryan Bembridge

April 3, 2017

Loan-to-values on buy-to-let mortgages are falling and this trend is expected to continue, Paragon Mortgages’ PRS Trends Report has found.

In the first quarter of 2016 the typical LTV fell by 2% to 35%, while this trend has gone on for some time since average gearing stood at 42% in Q2 2012.

John Heron, managing director of Paragon Mortgages, said: “Average gearing is low and getting lower, 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.”

The report found that buying intentions are subdued but there has been no significant buy-to-let sell-off as a result of the government measures to curb buy-to-let, including the reduction in mortgage tax relief.

The size of the average portfolio is 13 properties and landlords don’t expect to start flogging off their portfolios in the next 12 months.

The report was based on interviews with 203 experienced residential landlords.

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