Paragon group director of mortgages John Heron was in an upbeat mood last week as he announced the specialist buy-to-let lender’s return to new lending for the first time since it withdrew from the market in February 2008. It has secured funding from Australia-based Macquarie Bank in the form of a £200m revolving warehouse facility that can be refinanced in the wholesale markets.
The timing could not have been better, with Paragon’s announcement coming not long after Lloyds Banking Group indicated it is looking to take a step back from the sector with changes to its BTL products. Heron says: “We are delighted to be back in the game. We are looking forward to doing what we do best, which is to deliver innovative facilities to private landlords.”
He believes the BTL sector has suffered no more than the rest of the market and is in a position to grow over the next couple of years and reach a more “normal” level.
“Last year, buy-to-let lending was £8.4bn. That is a good deal smaller than the £40bn-plus we saw in 2007 but the reduction in scale in the buy-to-let market is not out of sync with the rest of the mortgage market.
“We are in line with the Datamonitor report, which said a normal buy-to-let market would look more like £25bn and we should expect to get back to those sort of numbers by 2014. We are fairly comfor-table with those sorts of predictions. That sounds reasonable and sustainable.”
Heron says he always leant towards a career in financial services and with his father having been a senior manager with Commercial Union, there is a family link to the sector.
After studying history and politics at the University of Warwick, Heron joined Nationwide Building Society as a graduate trainee. He says he was attracted to the ethics of the lender and its focus on the UK housing market.
Three years later, Heron joined Leamington Spa Building Society as manager of its City of London office after being attracted by the society’s forward-thinking ethos.
“It was quite an interesting time. The 80s were a period of entrepreneurial development in the mortgage market and businesses such as Leamington Spa Building Society were at the forefront of these developments.
“It was using the intermediary markets much more strategically in the sourcing of mortgage business and thinking rather more competitively about the mortgage product development process than perhaps the more staid members of the Building Societies Association.”
Heron left the society in 1986 to join National Home Loans, in what would become, to date, a 24-year affiliation.
“National Home Loans was one of the new breed of centralised mortgage lenders established in the wake of a new freedom in the financial markets. It set about doing mortgages in a different way, applying new methods and new technologies in funding, distribution and indeed management. That was incredibly exciting.”
He joined as a regional manager before becoming marketing director. Then, as NHL rebranded as Paragon in 1997, he became managing director of Paragon Mortgages and Paragon Group director of mortgages in 2003.
In the long term, Heron says the private rented sector is will take a bigger part in the housing market as the population increases and increasing numbers of people are unable to obtain mortgages.
“As a component of the housing market, our view – and I think it is supported by most housing analysts – is that the private rented sector is going to have to play a bigger role.
“The owner-occupier market is smaller proportionally now than it was at its peak and it is fairly clear that life is going to be difficult for the foreseeable future for first-time buyers, anyone with adverse credit and those with non-standard incomes because mortgages will be hard for those individuals to get hold of, if at all.”
Heron says we could well see the UK adopt a more European model, where renting plays a more important role in the housing market but he says the only way the UK can cope with the increased demand is to unlock buy-to-let finance.
“How is that sector going to improve its supply of property? The only way it is going to improve is if medium and largerscale professional landlords buy more property. The great irony is that these landlords want to buy more properties as they see fabulous trading conditions at the moment.
“There is extremely strong rental demand and house prices have been under pressure, the end result to that being they can get strong yields from property. The missing piece of the jigsaw has been buy-to-let finance, which has been disproportionately depressed by the credit crunch.”
Heron says Paragon will be working with landlords to achieve this goal.
“We see very strong demand, from professional landlords in particular who want to fill this gap and we are going to do everything we can to work with them to improve the supply of properties in the private rental sector.”
Born: Leeds, 1959
Lives: Sevenoaks, Kent
Education: University of Warwick
Career: 2003-present: director of mortgages, Paragon Group; 1997-2003: managing director, Paragon Mortgages; 1990-97; marketing director, Nat-ional Home Loans; 1986-90: regional manager, National Home Loans; 1983-86: assistant manager, Leamington Spa Building Society; 1980-83: graduate trainee, Nationwide Building Society
Likes: Skiing, music (performing and listening), tennis, football (England and Arsenal), film, photography, literature
Dislikes: Shopping, disingenuous politicians, Chelsea FC
Favourite book: Don’t have one but like what I am reading at the moment – Matterhorn by Karl Marlantes
Favourite film: The Maltese Falcon
Favourite musician or album: Blood On The Tracks by Bob Dylan
Career ambition: I’m living it
Life ambition: See my two boys through university and into worthwhile careers, ski gracefully in powder off-piste
If I wasn’t doing this, I would be…Probably wanting to work in Government, particularly in developing and implem-enting education policy