Landlords across the UK have “scaled back” their buying intentions, reduced their reliance on mortgage debt and improved affordability by spending less of their rental income on mortgage payments, research conducted by Paragon has found.
In its latest survey, PRS Trends Report for Q1 2019, the challenger bank revealed that, while landlords in the private rented sector (PRS) remain engaged, they are now prioritising measures to reinforce their financial strength over portfolio expansion.
The proportion of landlords looking to purchase property has fallen from between 15 and 20 per cent before the announcement of tax and regulatory changes in 2015, to just 7 to 10 per cent today.
Furthermore, portfolio gearing has dropped from 40 per cent in 2014 to 33 per cent today, with landlords who have three or more properties borrowing 36 per cent of their property value on average. Meanwhile, mortgage costs as a proportion of rental income is down from 30 per cent at the beginning of 2017 to 27 per cent now, which has been aided by landlords remortgaging onto lower interest rate and longer-term fixed mortgage deals.
Commenting, Paragon director of mortgage John Heron said: “The shift in focus from portfolio expansion to financial strength has driven a surge in buy-to-let remortgaging, with lower interest rates and longer initial fixed periods helping landlords reduce finance costs and lock in greater certainty. However, it also extends the product maturity cycle, guaranteeing a reduction in the scale of opportunity to refinance buy-to-let mortgage deals over the next few years.”
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