Paragon Group, the specialist buy-to-let lender, has seemingly shrugged off the harsh effects the recession had on the company, and has announced it is lending again. This could be seen as a good sign, as Paragon relies on wholesale funding from money markets and lending once more shows a further sign those markets may be recovering.
Rewind to early 2008, and the soaring cost of wholesale funding on money markets had taken its toll on Paragon and it closed to new buy-to-let business.
Since then, competition in the buy-to-let mortgage market has reduced dramatically, and the sector has been dominated by just two lenders, Lloyds Banking Group and The Mortgage Works (owned by Nationwide) – accounting for up to 80% of new business written. The number of available buy-to-let products has reduced significantly since July 2007 when there were 3,600 – today that figure has shrunk to 280.
But now Paragon has arranged funding via a new warehouse facility and will resume buy-to-let mortgages, for the first time since February 2008.
Why does this matter?
With Paragon back in the market, will we see the market stimulated with an influx of new lenders and edge back to the rates of the buy-to-let boom? At that time, buy-to-let rates were similar to personal residential mortgage lending rates.
David Hollingsworth, of independent broker London & Country Mortgages said: ‘I’m not sure that Paragon coming back into the arena will act as a stimulus, but it is certainly a welcome boost. Paragon is an established name in the buy-to-let market and focuses on professional landlords and it will almost be like having a new lender.
‘And like having any new lender in the market, the increase in competition can only be good for rates and is good news for a sector that has been hit hard.’