Date Published 21 February 2018
According to a mortgage lender's latest PRS Trends report, landlords are continuing to reduce their borrowing as during October to December 2017, it has been at its lowest ever level since records were started.
During last year's Q4 the average of Loans To Value (LTV) of 35% was the lowest since 2002 due to tax and regulatory charges that landlords have had to contend with, and causing them to invest in lower LTV buy-to-let mortgages.
Landlords who took part in the survey were asked when they would have to sell their properties if the expected mortgage interest rates come into force and more than half (51%) said they were already prepared for this, and the decision upon selling up would not be down to the mortgage interest rate.
49% said that if the interest rate rose to 5% then that would be time to leave the PRS sector, whilst 43% felt that if they increased rents it would not be solely affected by interest charges; 51% said that investment in BTL properties would not be determined by interest rates alone.
John Heron, Managing Director of the mortgage lender said: 'Contrary to the view held by some, there is strong evidence that gearing levels across portfolios are very low in the buy-to-let sector, with a peak of 43% LTV across all types of landlords in the last 15 years. Since that peak in 2012, gearing has been on a downward trend and currently sits at an all-time low of 35%.
"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."
Heron added: "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.'