Paragon Mortgages' Private Rented Sector (PRS) Trends report in early-May, based on interviews with a panel of more than 200 landlords, revealed that landlords are 'strengthening their credit profiles' as they shift investment away from new acquisitions and towards the upgrading of existing portfolios.

The number of landlords keen to buy properties fell to 9%, down from 14% in the previous quarter. However, fewer landlords said they would reduce the level of development on properties as a result of decreased income due to tax relief cuts. In Q4 2015, 31% of those surveyed said they would cutback spending (on their properties) against 14% in Q1 2016.

Affordability levels were also said to be improving with landlords spending, on average, 28% of their rental income on mortgage repayments, while more than half of all respondents spend less than a quarter of their rental income. Returns were found to be stable with the average net rental yield remaining at 4.7% for the third consecutive quarter.

John Heron, director of mortgages at Paragon, said: "The PRS is facing the prospect of a great deal of change as a result of the significant shift we have seen in fiscal and regulatory policy. Some landlords are responding to this uncertainty by planning fewer new purchases and investing in their existing portfolios."