Paragon to resume lending

Get the bugles out ready for the fanfare

Paragon are entering the buy-to-let lending market. No really this time they really are lending again! There have been several false dawns to date.

The fact that Paragon are back is not so fantastic in itself, lets face it their rates were never that great. No, the most significant thing is that lenders like Paragon can now once again access funds in the wholesale markets to lend to landlords. Unlike building societies Paragon and other similar types of lenders cannot use retail deposit funds from saving to use as funds to advance as buy-to-let loans. Instead their business model relies on funds from the capital markets. Once the loans are made to landlords lenders like Paragon securitise the debts and then sell them on to investment institutions allowing them to repeat the process and create more buy-to-let loans.

In this case Paragon have managed to secure a £200m mortgage warehouse facility from Macquarie Bank. Commenting on the loan Paragon statement reads:

“The facility will allow the group to recommence lending to the private rented sector, a segment of the UK housing market that has seen considerable expansion in recent years and in which the group has been a major participant. Demand from tenants for rental properties in the UK has been strong and is expected to remain buoyant going forward.”

Lets hope that other lenders such as Paragon will re-enter the buy-to-let market, increasing the number of lenders and in so doing drive down the cost of borrowing for landlords.

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