Paragon starts buy-to-let lending after two-year break

Published 28th Sep 2010

• Buy-to-let mortgage specialist has £200m credit facility
• 'Demand for rental property has never been as strong' –


Paragon will begin lending to buy-to-let property investors again for the first time since early 2008, taking advantage of booming rents as would-be buyers fail to get on to the housing ladder.

The buy-to-let mortgage specialist has arranged a £200m revolving credit facility to back new mortgages which can be used repeatedly for four years.

Over the last few months the company has been offering trial mortgages to professional landlords, who typically own a dozen properties and form the bulk of its customers, and found strong enough appetite to resume large-scale lending again.

Paragon chief executive Nigel Terrington told Reuters: "Demand for rental property has never been as strong. A lot of first-time buyers can't get mortgages or don't want to take on a mortgage."

Rents nosedived after peaking in 2008 but have climbed steadily over the last year. The tightening in mortgage lending conditions, typically requiring a larger deposit, has forced many would-be first-time buyers to continue to rent. The financial crisis and property market crash has also resulted in a slump in the number of new homes being built, further squeezing supply.

The move comes despite a housing market slowdown, with the British Bankers Association saying this month that the number of loans approved for buying houses in the UK fell in August to a 16-month low.

The company said that the private rental market was "countercyclical" to the wider housing market, as rents – and demand for buy-to-let mortgages – typically rise when transactions fall.

Earlier this summer, the Association of Residential Lettings Agents, which represents landlords, warned that "the prospect of a severe rental housing shortage is ever more likely".

Paragon also said in a trading update that the number of borrowers who were in arrears has continued to fall, and those more than three months behind represented 0.86% of the total order book. It said it expected full-year profits to be above the current market forecast of £58.2m.

About one third of the UK's 3.3m privately rented homes have been bought with a buy-to-let mortgage. Buy-to-let lending was the lowest last year since 2001. Paragon is the leading specialist provider, with Lloyds and Nationwide the other main players in the market.

Source: ' Guardian '

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