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Landlords have large chunks of equity in their properties

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03/04/2017
Landlords have large chunks of equity in their properties

The average landlord has a huge 65% equity stake in their buy-to-let investment portfolio – according to a survey of experienced landlords by lender Paragon Mortgages. This was up 2% in the first quarter of 2017.

This means that they only owe mortgages totalling, on average, 35% of the total value of their properties – what is known as ‘low gearing’.

Two-thirds of landlords (68%) now have borrowings of less than half the value of their investment property portfolios and, since 2012, average gearing has reduced significantly, from 42% to 35%.

Strong surplus

On average, landlords spend 30% of their rental income on mortgage payments, with almost half (43%) saying they spend less than a quarter.

Although buying intentions remain subdued as a result of changes to Stamp Duty on second properties, there has been no large-scale sell off by landlords. The size of the average portfolio is 13 properties, unchanged from the end of last year, and landlords don’t expect to buy or sell over the next 12 months.

John Heron, managing director of Paragon Mortgages, said: “Average gearing is low and getting lower, and this long-term de-leveraging demonstrates just how financially conservative buy-to-let landlords are.”

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