Gearing levels in landlords portfolios are at their lowest levels since May 2005, indicating high credit quality among buy-to-let investors, according to Paragon Mortgages.
Paragon says its research indicates buy-to-let mortgage arrears are likely to remain low despite ongoing problems in the housing and credit markets.
Research by the provider, taken from a survey of 200 landlords, reveals the average level of borrowing across their portfolios is 36%, down from 38% at the end of 2007.
Paragon also cites recent research from the Council of Mortgage Lenders, which suggests arrears among the buy-to-let market were 0.73% in 2007, lower than the 1.1% average.
John Heron, managing director of Paragon Mortgages, believes landlords are cautious investors who take a low-risk approach to their portfolios.
“Although borrowing costs have risen since the beginning of last year, landlords have positioned themselves to cope with this,” he explains.
“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 landlords with low gearing will be more able to expand their portfolios during 2008 to take advantage of growing tenant demand and rising rents.
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