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Landlords maintain gearing levels in buy-to-let market

Buy-to-let lending remains at comfortable levels relative to property valuations, with less than 5 per cent of landlords having loans over 75 per cent of the value of their investment property portfolios, says Paragon Mortgages.

The March issue of Paragon&#39s quarterly buy-to-let trends survey shows that the average loan to value is just 42.7 per cent, down slightly from 43.9 per cent in December 2002 and from 43.3 per cent in October 2002.

Over the first quarter of this year, landlords saw their gross yield fall to 8.5 per cent from 8.6 per cent in the previous three months, with the average period that a property lays empty increasing to 2.9 weeks a year from 2.5 weeks a year.

Ninety per cent of landlords said they expected their investment property portfolios to grow or remain the same size over the next year, down from 93.5 per cent in the last quarter, with 35 per cent forecasting increases over the next year, down from 38.5 per cent in the last quarter.

The average growth in the net value of residential property expected by these landlords is 7.1 per cent, up from 6.9 per cent three months ago.

Paragon says lenders&#39 mostly cautious credit policies mean that buy to let is well underpinned.

Managing director John Heron says: “Despite what some people have been saying about the market, the buy-to-let sector looks in pretty good shape.

“Landlords&#39 gearing levels are still very reasonable and getting lower and their confidence is high, with more than a third expecting to grow their portfolios over the next 12 months.”

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