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Landlords are confident despite rising mortgage interest rates

Landlords are still reducing borrowing as levels of gearing – the ratio of long-term debt compared to its equity capital – reached an all-time low in Q4 2017, according to Paragon.

Based on interviews with over 200 landlords, Paragon’s latest PRS report found that the average loan-to-value (LTV) of investment property portfolios was 35% in Q4 2017, the joint-lowest level recorded in over 15 years.

With recent regulatory changes, landlords have less motivation to take higher LTV buy-to-let mortgages. However, respondents appeared confident of coping with increased outgoings, with 51% of landlords saying that mortgage interest rate does not determine any decision to sell properties.


Of the remaining 49%, the average interest rate at which landlords said they would consider selling properties is 5%.

John Heron, managing director of mortgages at Paragon, commented: “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.”

Meanwhile, 43% of respondents said that any decision to increase rent was not dependent on mortgage interest rates, and 51% said that mortgage interest rates did not affect any decision to refinance properties.

“There is no evidence to suggest lending to landlords has been anything other than sustainable,” he continued.

“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.”


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