Lender says buy-to-let still booming
Early signs from Solihull-based mortgage lender Paragon suggest that investors are continuing to pile in to the buy-to-let mortgage sector despite fears that it is set to implode.
Speaking to The Birmingham Post ahead of year end results, chief executive Nigel Terrington said the sector is continuing to thrive despite the scaremongering.
“Around 18 months ago there was a similar outbreak of negative stories about buy-to-let,” he said. “A lot of them were also very misguided.”
He added that estimates showing the sector has grown by up to 30 to 40 per cent in recent years have been based on incomplete statistics submitted to the Council of Mortgage Lenders. They focus on too narrow a pool of information and do not go back far enough, he believes.
“They only started collecting data in 1998, but the private renting sector has been going on for ever,” he said.
Mr Terrington feels the picture has been distorted because while specialist lenders, such as Paragon, are able to identify customers embarking on a buy-to-let investment, the clearing banks which have been losing market share in the sector have often failed to identify whether a mortgage is used as an investment or not.
“Overall the market is not growing,” he said. “Just one aspect is.”
The Council of Market Lenders has estimated the buy-to-let market is worth some 41 billion. But Mr Terrington believes the failure of clearing banks to correctly classify their mortgages means the true stable figure is nearer 80 billion.
“Why would it implode?” he asked, adding that Paragon has not seen any warning signs in terms of voids or arrears figures. “There is compelling evidence buy-to-let is not under strain. We speak to landlords everyday and carry out surveys and they are still feeling buoyant.”
Reflecting Paragon Mortgages’ strength as a specialist lender to buy to let investors, it said in a trading statement that new lending has been significantly higher than the first half of last year.
In the half year to the end of September 2003 its buy-to-let mortgage book stood at 1.9 billion, out of an overall Paragon group book of 5.3 billion.
May 9th, 2008 at 1:31 am
Paragon do have a vested interest in talking up the market mind. It is a difficult one to call as it would make sense that if people are looking to sell their homes in this uncertain time, simply to lock in equity gains they have made then the demand for rented accomodation will be rising.
I do not think there is a problem for experienced buy to let investors who will have bought part of their portfolio many years back and have benefitted from the property boom. If the housing market dips significantly they will add to their portfolio. The problem is for the people who jumped on the bandwagon later on in the day who will not only find their properties potentially in negative equity but also a lack of mortgage products on the market that can cater for the Loan to value (LTV) they need.
We will have to wait and see.