Paragon has said it may have to stop lending to new borrowers because of the credit squeeze

Buy to let mortgage specialist Paragon has said it may have to stop lending to new borrowers because of the credit squeeze. Paragon raises all its cash on the money markets not from savers and so it has been caught out by the crunch.
It has taken some products off the market and increased the prices on others.
As Paragon has no savers it cannot turn to Mr. Darling for help and has indicated it may raise money via a rights issue – issuing new shares to raise cash.
If this does not happen there will be doubts about its future – just as there were in its previous incarnation as National Home Loans back in the late 1980s – when it was last bailed out.
However, existing buy to let investors with loans from Paragon should not be under threat - though they may find Paragon’s new rates not to their liking when they need to re-mortgage.
Paragon is one of the largest lenders in the residential property investment sector, funding one in every ten buy-to-let loans. In general, it has tended to avoid new build flats, so it’s lending book may be attractive to bidders.
All this news is grist to the mill of newspapers that have long (very long) predicted the demise of buy to let. They are fond of saying that the falling number of buy to let loans and their rising cost could force some investors to sell.
And they reported with glee that no less an august instittion than the Royal Institution of Chartered Surveyors has predicted that buy to let is set to become the preserve of the wealthy.
RICS has recently released figures suggesting that to purchase a buy-to-let property you now requiore a deposit of about £65,000 – effectively 30 per cent of the property’s value. They say five years ago, the required deposit was £10,000, or 8 per cent of the value of an average-priced property in the UK.
But whilst in theory borrowers needed to stump up only 8 per cent of the property value, the lending criteria in 2002 were much tighter, especially the irent to interst ratio which meant that lenders actually required investors to put down a deposit more like 15 or 20%.
So, I don’t shrare the pessimism
Buy in the right area and the right kind of property and you should do well.
And as defaults in buy to let are still lower than the rest of the mortgage market, I don’t expect lack of credit will be a problem for long.
And despite what RICS says, there are still plenty of properties on the market, even for new-build flats, for which a 20 per cent deposit is perfectly satisfactory for the lender
If you need more advice on investing in property or buy to let please ask me. I’m David Lawrenson from property consultancy firm www.lettingFocus.com
I’m the author of the property investors bible “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on buy to let property and a well known property speaker and I contribute to newspapers and a host of property websites, write a property investment blog and run a property mentoring service.
I’m alsoa columnist for FinancialExpress.net and Archant’s “The Guide” magazine
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my buy to let blog and details of my networking, advice, property seminar programme at my website www.lettingfocus.com.
My next London property invesment networking meeting is on March 12th. Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property investment solutions because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

What things do I need to look out for with company lets?

This article has some useful advice on company lettings and corporate lets.
Where the tenant is a company not an individual, the tenancy agreement document will look similar to one for a normal assured shorthold tenancy (AST), but ASTs cannot be granted to companies so the tenancy will be regulated under common law not under the Housing Act 1988. This means no rent control and the procedure for evicting tenants is also different.
You’ll need to use tenancy agreements which are appropriate for company lets, not the normal AST forms.
A common type of let is the 12 month company let when a lease is taken out in the name of the firm – with a break clause after 6 months.
However when letting to a company it’s sometimes a good idea to take a guarantee from one or more of the directors, just in case the company folds leaving no assets to pay rent or for damage to the property.
Some advantages of company lets are as follows…1) Company lets are always popular with companies as a cheaper option than putting an executive in a hotel and most executives prefer them to hotel living too! And for the company, dealing with a landlord is less hassle than maintaining a company flat 2) Company letting rents can be 10 to 40 per cent above what’s achievable on a longer term let 3) Many companies pay quarterly in advance 4) A big company should be more secure than an individual.
Some disadvantages are….
1) Company lets means more voids and frequent changes of tenant means more work finding new tenants and checking in and out 2) As company let rents are higher your client will expect high standards and for things to be fixed fast 3) Only quality property in up-market areas and close to business centres will rent - making entry costs high for company lets. Where furnishings are required, think expensive 4) To find tenants you’ll need up-market letting agents and relocation agents – again adding to your expenses.
If you need more advice on company lets or letting to companies, please ask me. I’m David Lawrenson from landlord experts http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.I
I’m an expert on buy to let and a well known property investment commentator and I contribute to newspapers and a host of property websites, write a property investment blog and run a property investor mentoring service.
I also provide consulting help to banks, building societies, housing associations and web portals to help them with their buy to let and property products and services.
You can read more of my buy-to-let blog and details of my networking, advice, property seminar programme at my website http://www.lettingfocus.com./
My next London property invesment networking meeting is in March. Click here for details: Property Investment Seminar
What’s unique about lettingfocus.com is that we offer independent property advice because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog

Why have mortgage companies tightened lending on buy to let?

There were some interesting bits of news from the weekend financial press.
First off is the fact that Alliance & Leicester is to restrict lending on new build flats to 70% loan to value amid continuing concerns that prices of new build are falling in many areas and there is a big oversupply problem -too many flats and too few tenants causing landlords who have bought into these places to struggle with falling rents and capitals values.
Those who came to see me speak over the last few years will be well aware that I’ve warned of a big problem to come with identikit flats. Well, now it’s here!
Second, Paragon’s shares were under pressure last week. Paragon is one of the biggest buy to let mortgage lenders. Formerly, known as National Home Loans, they struggled in the credit crises of 1989-1990, when they had to be bailed out. Just as in 1989, they still raise nearly all their money from the money markets -so this really is a case of history repeating itself.
Third, mortgage lenders’ continued tightening of lending criteria in the buy to let market has led RICS to say that buy to let will be a rich man’s game from now on.
I don’t think it’s that bad, but if you have not been in buy to let before you are going to have to find at least 20% of the value of a property – and probably 25% from your own funds from now and for a little while.
So, yes it will get harder for the novice.
But if you are a new to buy to let and you don’t have at least 20% to put in, please don’t be tempted to listen to all the guff about “gifted discounts” on new build and bridging loans to buy below market value – if you do, you are only asking for trouble further down the line.
Sorry to say, but if you cannot really afford to get in, don’t play the game.
If you need more advice on property investment or buying property below market value in general, please ask me.
I’m David Lawrenson from landlord mentoring firm http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on buy to let and a well known property speaker and I contribute to newspapers and a host of property websites, write a property investment blog and run a property mentoring service.
My business is now increasingly focused on providing consulting help to banks, building societies, housing associations and web portals to help them with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property seminar programme at my website http://www.lettingfocus.com/
My next London property invesment networking meeting is in March. Click here for details: Property Investment Seminar
What’s unique about lettingfocus.com is that we offer independent property investment help because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.