The average gearing across landlords’ portfolios is at its lowest level since May 2005, according to Paragon.
A panel survey of 200 Landlords revealed the average level of borrowing across their portfolios was 36 per cent, down from 38 per cent in the final quarter of 2007.
Paragon claims the low level of gearing highlights the strong credit quality of buy-to-let investors.
Recent Council of Mortgage Lenders figures showed that arrears in the buy-to-let market were at 0.73 per cent in 2007, significantly lower than the 1.1 per cent arrears level recorded in the wider mortgage market.
Managing director John Heron says: ‘Landlords are cautious investors who are conservative and risk-averse in the management of their portfolios. Although borrowing costs have risen since the beginning of last year, landlords have positioned themselves to cope with this. Historically, possessions in the buy-to-let market have been significantly lower than the overall market and the latest set of data from CML shows that buy-to-let continues to outperform the market in terms of credit quality.’
Paragon says that rents are rising rapidly and landlords who are lowly geared are well positioned to expand their portfolios over 2008 as demand rises. In a softer housing market, landlords will be able to make opportunistic purchases of further properties.
Heron adds: ‘Landlords are well placed to take advantage of a weaker housing market. The majority are under-geared and have excellent credit histories. With rising rents and higher yields on properties, we expect buy-to-let arrears and possessions to continue at a lower level than in the wider market.’