There is a myth across the UK that the buy-to-let market is full of cowboys and amateur landlords and Paragon chief executive Nigel Terrington wants to set the record straight.
The myth, says Terrington, is sending the wrong message to investors who are looking to increase their holdings in what he believes is a burgeoning sector of the industry.
Statistics from the Office of the Deputy Prime Minister show that 30 per cent of landlords hold only one property – which would lead one to assume the marketplace is made up of amateurs – but these landlords account for only 1 per cent of the property held in this sector.
Terrington says the real make-up of the sector is found at the other end of the spectrum, where 75 per cent of leased properties are owned by just 15 per cent of landlords, usually owning more than 100 properties each.
He says: “Not only is talk of an industry dominated by cowboy landlords false, it is unhelpful in a marketplace that has been professional for many years and is continuing to hold a respectable position in any investment portfolio.”
Paragon is a specialist buy-to-let lender and its main distribution is through brokers, with 75 per cent of its business coming from IFAs and mortgage brokers and 60 to 70 per cent of its book being repeat customers.
Terrington says: “Our typ-ical broker tends to be the small specialist financial broker who does his or her client's mortgages as part of their entire portfolio management.”
Paragon's customer base is at the high end of the BTL market, where professional landlords usually have more that 20 properties.
He says the company is committed to continuing its strong relationship with IFAs in the high-net-worth market as changes in regulation and pensions will see buy to let growing in demand for people looking to spread their investments and utilise their pensions to maximum effect: “IFAs organising Sipps for their clients will doubtless see buy to let as a strong component of a pension,” he says.
Paragon has focused on the top end but Terrington says the acquisition of Mortgage Trust in June last year has greatly expanded the firm's reach into the middle market as it focuses more on the master mortgage broker and broker packages.
The deal has opened up a much wider customer base for Paragon, which is also benefiting from a closer relationships with packagers.
Terrington says: “These relationships will be crucial for lenders. They were not the types of relationships that we really concentrated on with Paragon but will do more so in the future. The issue is to get on the right panels at the right time.”
He is dismissive of talk that regulation and consolidation will see the demise of small brokers, especially in the BTL marketplace, where he says relationships with the client are all-important. “For years, people have been anticipating the demise of the broker. It is true that regulation will make business more costly but good advice will always be what the buy-to-let client is looking for and advisers and brokers that can position themselves well will always be in high demand.”
Terrington says all these factors – HNW buy-to-let landlords, increased awareness in the middle market, IFAs advising more and more on buy to let – all point to the rise of the buy to let landlord as an astute investor rather than the cowboy he or she is made out to be in some of the mainstream media.
Indeed, sustained confidence in the buy-to-let market seems to show consistency in the types of individuals looking to buy to let as part of their investment portfolio. Mortgage Express's quarterly survey into attitudes towards the buy-to-let market is showing that, notwithstanding a small fall in demand for buy-to-let properties, overall confidence in the market is rem- aining strong.
Mortgage Express product development manager Roger Hillier says all the signs are there for a solid buy-to-let market.
Seventy-eight per cent of landlords say they have not experienced any void periods in their properties over the past six months. And of those who did, 83 per cent said they lasted under four weeks.
Additionally, around 40 per cent of landlords think that demand for rental property has remained the same over the past six months, with 36 per cent believing it is increasing.
Hillier says: “There has been a small drop in demand for buy to let but void periods have remained low and most investors have said they will maintain or increase their current portfolio. This suggests that the market is inherently stable and the long-term outlook for buy to let remains strong.”
Half of the landlords surveyed by Mortgage Express say over the next six months they intend keeping their portfolio at its current level and 40 per cent say they intend to grow it.
Terrington is not surprised. He says growth in demand for rented accommodation in the UK, combined with the increased ability to put property into a pension scheme is enough to keep the buy to let market growing indefinitely: “It is a sector that has no signs of slowing in the long term and IFAs are finding it more and more useful for their clients.”