Paragon returns to lending
Share
Paragon Mortgages is returning to new lending this morning and is launching a new range of buy-to-let products targeted at professional landlord investors.
The lender aims to widen choice and competition in the buy-to-let mortgage sector.
Paragon will commence lending with immediate effect through a panel of brokers and will widen this distribution over the next few weeks.
Paragon says it is fully committed to mortgage intermediary distribution, although it will also accept direct business.
Products include two year fixes at 5.5%, at 75% LTV and 5.3%, at 65% LTV. The deals have 2.25% and 2% fees respectively.
There are also two-year trackers at 4.30%, at 65% LTV, and 4.80%, at 75% LTV, with 2% and 2.25% fees respectively.
Five year trackers are available at 4.55%, at 65% LTV, with a 2% fee and 5.05%, at 75% LTV with a 2.25% fee.
Paragon’s lending criteria means it can offer professional landlords facilities that are not widely available elsewhere, such as limited companies, multi-unit blocks and Houses in Multiple Occupation.
The firm says it will maintain a prudent and risk-averse approach to new lending, placing greater value on long-term customer relationships, credit quality and profitable products than simply market share.
It says each application will be underwritten on an individual basis, rather than relying on computer scoring, and it is employing its own team of surveyors to assess the property thoroughly and will design its products to appeal to good quality, experienced landlords.
The number of accounts more than three months in arrears across Paragon’s portfolio of buy-to-let assets has continued to fall and is currently just 0.86% of the book.
This is significantly below buy-to-let market peers and also the wider mortgage market.
John Heron, Paragon Group’s director of mortgages, says: “We are really excited about our return to new lending. The market is still fairly subdued and the road back to a ‘normal’ market is going to be a long one, but we are back in the race and we will do our level best to make sure that we expand the choices available in buy-to-let finance for landlords and intermediaries.
“Access to buy-to-let mortgage finance is still a major issue for residential property investors, and particularly professional investors who may exceed lenders’ aggregate lending limits or who find that their more complex or unique finance requirements cannot be met by the standard buy-to-let lenders.
“Competition is vital for a healthy and vibrant buy-to-let market, and we aim to provide that competition. Supply of private rented sector property is already under severe strain, which is leading to rental inflation. It will be professional landlords that stimulate the growth of the sector, and we want to be there to help them achieve this.”
Paragon has arranged funding via a new warehouse facility and will resume mortgage origination with immediate effect. These will be the first new buy-to-let mortgages that Paragon has offered since February 2008 when it withdrew from the market due to conditions in the global financial markets.
Macquarie Bank is providing the £200 million warehouse facility. The facility’s revolving nature will mean it can be used repeatedly to pre-fund Paragon’s future securitisation deals, giving it a sustainable and secure funding platform.
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
Readers' comments (7)
Luke Atkinson | 28 Sep 2010 10:05 am
Well done Paragon, just as the likes of C&G pull out of this market taking a big bag of tax payers money with them, smaller lenders like yourselves reappear with prudent lending criteria and a commitment to those channels that fed them quality business. Great arrears stats too.
Unsuitable or offensive? Report this comment
Rob Jupp | 28 Sep 2010 1:53 pm
Any lender entering or reentering the UK mortgage market has got to be excellent news right now but a lender with the experience, management team and brand as strong as that of Paragon coming back is one of the most significant announcements for many, many months. Welcome back; you have been sorely missed.
Unsuitable or offensive? Report this comment
Ketan Yadav - Avenue & Co Private Finance | 28 Sep 2010 2:36 pm
The facility, to be rated by Fitch Ratings and provided by Macquarie Bank, will be available for a four-year term to Paragon Fourth Funding Limited, and interest will be charged on the amount drawn at one month LIBOR plus 2.875 percent.
The lender will initially target professional landlords, a category which it identifies as being underserved by current buy-to-let providers.
Paragon's product range includes fixed rates priced from 5.30%, available up to a maximum of 65% LTV, and trackers from 4.30%, also available up to 65% LTV. The maximum LTV currently on offer is 75%.
Deals will be available for limited companies, multi-unit blocks and Houses in Multiple Occupation
Paragon intends to stick to its former strategy of manually underwriting each case and employing its own surveyors to assess the properties it lends on.
Unsuitable or offensive? Report this comment
Ketan Yadav - Avenue & Co Private Finance | 28 Sep 2010 3:04 pm
An outline of Paragon BTL criteria:
Maximum LTV Loan amount :
Up to 75% LTV £500,000
Up to 70% LTV £1,000,000
Up to 65% LTV £2,000,000
Maximum aggregate borrowing: Normal total mortgage exposure per borrower £5,000,000.
Income: Applicant(s) should have a minimum combined gross annual income of £25,000 per annum and all income must be evidenced.
Affordability: Gross rental income from the property should equal or exceed the individual product requirements, subject to an absolute minimum of 130% of an interest-only loan payment calculated at a rate of 7%
Minimum loan amount: £30,000
Mortgage term: Minimum 5 years - Maximum 25 years
Property: Minimum property valuation £75,000
Single properties divided into a max of 20 units considered on an individual basis
HMO’s considered – landlord must have a minimum three years experience
Part commercial – considered where there is a commercial element not exceeding 40% of total floor space.
Limited Companies: Applications will be considered from Limited Companies
Unsuitable or offensive? Report this comment
Mylo Holmes | 28 Sep 2010 4:49 pm
Welcome back to Paragon, this is what the industry needed and lets hope this is the start of a brighter future for us all
Unsuitable or offensive? Report this comment
Geoff Laird | 28 Sep 2010 9:19 pm
One of the best pieces of news to hit the Money Headlines; a welcome return by a lender who since 1996 has consistently demonstrated a comprehensive understanding of the strategies adopted by professional investors and the funding options needed to meet their requirements; something patently lacking amongst certain other lenders claiming to support the Buy to Let initiatives.
For some brokers they will find the underwriting requirements a challenge , but this will not be new given that a number of such brokers refused to grasp the benefits by listening to what Paragon needed to underwrite an application choosing instead to use the softer options like Mortgage Express and Midshires, one of which is defunct and the other limited to 3 properties or £2 millions whichever is the soonest; but for the Professional Commercial broker the champagne Corks will be popping in celebration of Paragons return to the market.
Unsuitable or offensive? Report this comment
HDC | 29 Sep 2010 1:24 pm
Always good news when a lender returns to the market or new lenders enter the market.
Well done Paragon and Aldermore - SHAME NO COURAGE TO LEND FUNDS IN SCOTLAND THOUGH.
Unsuitable or offensive? Report this comment