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Quality is the key to turn round buy to let

Paragon Mortgages predicts that buy to let will be the first sector to bounce back from the credit crunch.

In an interview with Money Marketing, managing director John Heron says BTL is best positioned for an early recovery. He says: “The longer the credit crunch goes on, the closer we are to a recovery. We are now talking to brokers like we have not done in months and people are cautiously beginning to buy again.”

The lender says BTL will see a rapid improvement when liquidity returns to the market and professional landlords will be the first to benefit.

“Demand from profess- ional landlords will be the first to return and that is because these people are not emotive, they just demand yields and that is going to attract lenders,” says Heron. He consider that the key for lenders to take advantage of the bounceback is to improve their buy-to-let books and ensure borrower quality by using specialist teams of surveyors.

Heron says: “We are lending on sustainable, quality properties and we always have done. In the near future, lenders will want to buy books of well researched, safe mortgages and buy to let will do well with securitisation. We will be able to provide quality borrowers and quality mortgages.”

Despite predictions of better times to come, he admits the current situation is frustrating for professionals looking to grow their portfolios. Heron says this is partly because mixed-book lenders have been too cautious and withdrawn too many products.

He says: “Professional landlords are frustrated. They see a buyer’s market out there but there is no funding to increase their portfolios. It is difficult for them as they know if they had the funding, they could negotiate 20 per cent down on a property right now.”

Recent research by Moneysupermarket.com found that BTL products have plumm- eted by an astonishing 93 per cent this year.

But Heron says: “These sort of statistics are just stupid. It is just a product count, it does not tell us anything about the BTL market. There is no regard to rental incomes, to demand or to yields.”

Paragon believes the future for specialist BTL brokers is good. Heron says: “The credit crunch has taught us how to cope with difficulties and specialised brokers have done well. They have been developing their relationships with professional landlords and the landlords have realised how important brokers are to them as things are not as easy.”

Heron remains tight-lipped regarding a possible buyout of Paragon by US investors but he believes its stance of quality over quantity will prevail. He says: “Too many BTL lenders chose increasing their assets over quality borrowing for the last few years and this is now coming home to roost.

“We at Paragon have tried to avoid the traps. We have securitised since 1987 and we are learning now to deal with the new market. We have made sure not to compromise our customers, our intermediary partners and our products.”

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