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hero Landlords braced for impact

Landlords braced for impact as tax relief changes take effect

  • Average investment portfolio in Q1 2017 is 13 properties, in line with long-term average
  • Landlords predict no change in portfolio size over the next 12 months
  • Gearing on a downward trend, with average LTV down to 35%

There is an increased understanding of the implications of the Government’s changes to tax relief on finance costs amongst landlords, according to Paragon Mortgages’ latest PRS Trends Report for Q1 2017, based on interviews with 203 experienced residential landlords.

The Government’s reduction in buy-to-let mortgage interest tax relief, announced in 2015, is being phased in from this month and 78% of landlords surveyed reported an understanding of the personal implications of the changes, up from 71% in Q4 2016.

This increase in understanding is paired with a smaller percentage of landlords saying they do not understand the implications (7% from 11%) or they require more information (13% from 18%), and is a further indication that landlords are preparing for the impact of the changes.

Reassuringly, landlord optimism was stable in Q1 2017, with the overall average rating of prospects for the PRS over the next 12 months now at 6.7. This maintains a modest upward trend since Q1 2016 and suggests confidence is returning amongst landlords following a turbulent 18 months, as they gain greater understanding of the pressures they are likely to face and developing strategies to mitigate at least some of the impact.

John Heron, Managing Director, Paragon Mortgages, said:

John Heron
It’s encouraging to see that the PRS has not been negatively impacted to the degree that had been widely predicted, despite some turbulence over the last couple of years. This increase in understanding combined with effective financial planning may be the key drivers behind a steadier picture in terms of overall optimism amongst landlords.
However, we remain cautious, as landlords will not be fully impacted for some years yet and, whilst we have been able to track a modest recovery in confidence since 2015, the sector is still some way off its peak; the PRS is finely balanced and will remain so for some time.

Click here to see the full Paragon Mortgages Q1 2017 PRS Trends Report.

Paragon Mortgages is a trading style of Paragon Mortgages (2010) Limited (Registered in England No:6595834) and Paragon Bank PLC (Registered in England No:05390593). Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Paragon Bank PLC is registered on the Financial Services Register under the Firm Reference No:604551. Registered office: 51 Homer Road, Solihull, West Midlands B91 3QJ.