Stability the key for buy-to-let

Buy-to-let yields remained stable at 6.4% for the second consecutive month in June, according to Paragon Mortgages' Buy-to-Let Index. Average UK rents, which had been rising rapidly, have stabilised just short of £1,000 a month, and remain 9.3% higher than a year ago.

Regions achieving the highest yields in June were Wales (7.6%), the North (7.4%) and the North West (7.3%).

Over the coming months, the buy-to-let market will be a vital source of stability in an uncertain housing market. Returns remain attractive and strong tenant demand encourages landlords to retain property, whilst also looking for opportunistic purchases. The average portfolio gearing is less than 40% - giving landlords plenty of room to free up equity for further investment.

John Heron, managing director of Paragon Mortgages, said: ‘For the vast majority of landlords, a slow housing market is nothing new. They recognise the counter-cyclical nature of buy-to-let and many landlords have held property through previous housing cycles. Falling prices are spooking first-time buyers and they are delaying house purchase, with tenant demand at high levels as a result.'

He added: ‘During the downturn of the early 1990s we witnessed mass possessions because there was little alternative to house purchase and young buyers had borrowed above their means. Today's modern and vibrant private rented sector provides people with a viable alternative to owner occupation and buy-to-let provides housing for young people who would otherwise have little choice but to buy and be financially stretched.'