Saturday, December 01, 2007
Paragon may stop lending to new borrowers because of credit squeeze says Letting Focus
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.
New Mortgage Rates
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 institution than the Royal Institution of Chartered Surveyors has predicted that buy to let is set to become the preserve of the wealthy.
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 rent to interest ratio which meant that lenders actually required investors to put down a deposit more like 15 or 20%.
So, I don’t share the pessimism
Buy in the Right Area
Buy in the right area and the right kind of property and you should do well - even if property prices do take a tumble over the next 18 months or so.
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 (for now at least) perfectly satisfactory for most lender.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property investing experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property book for the last 3 years.
What’s unique about LettingFocus is that I offer independent unbiased
property newtowrk seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy it at a low price, how to make sure you get tenants who are going to stay & pay the rent and how to manage it.
I have been a landlord and property investor myself for over 25 years.
LINKS
IF YOU HAVE A SITE WHY NOT LINK TO US!
Find out about GREAT DEALS we have arranged for landlords by clicking here: Services for Landlords and seeing our Landlords’ Affiliate page. And if you sell products to landlords and property investors and you have national coverage, get in touch!
For info on our SEMINARS click here: Property Seminars, Networking Evenings and Consulting
Our Events only take place twice a year. For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Seminar Event
For ONE TO ONE CONSULTANCY help click here: Private One to One Consulting
For TESTIMONIALS from past customers click here: Testimonials
To BUY THE BOOK click here: Buy the Book at Amazon
For THE HOME PAGE OF THIS BLOG click here: Blog
For THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For GREAT OFFERS on Products and Services for Landlords, click here: Landlords Resources
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!
Copyright of Blog: David Lawrenson 2009.
This blog is updated roughly once a week usually on a Monday or Tuesday.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
Over on the right hand side under all the previous blog entries you will see a button which says “Site Feed.” Copy the link into your News Reader or News Aggregator.
If you have a website & are thinking of reproducing material here, that’s fine but we DO require a link to the blog to be included, including also all the links in this section. (The full article including all links must be available to ALL VIEWERS of your site and not restricted.)
To view posts on related topics select a “Category” at the bottom of this page.
WANT TO ADD A COMMENT?
To add a comment to this post, you just click on “link to this post” then simply add your comment. To view older comments, you’ll need to click “link to this post” and view comments (which will appear at the bottom of the post.)
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.
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.
New Mortgage Rates
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 institution than the Royal Institution of Chartered Surveyors has predicted that buy to let is set to become the preserve of the wealthy.
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 rent to interest ratio which meant that lenders actually required investors to put down a deposit more like 15 or 20%.
So, I don’t share the pessimism
Buy in the Right Area
Buy in the right area and the right kind of property and you should do well - even if property prices do take a tumble over the next 18 months or so.
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 (for now at least) perfectly satisfactory for most lender.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property investing experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property book for the last 3 years.
What’s unique about LettingFocus is that I offer independent unbiased
property newtowrk seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy it at a low price, how to make sure you get tenants who are going to stay & pay the rent and how to manage it.
I have been a landlord and property investor myself for over 25 years.
LINKS
IF YOU HAVE A SITE WHY NOT LINK TO US!
Find out about GREAT DEALS we have arranged for landlords by clicking here: Services for Landlords and seeing our Landlords’ Affiliate page. And if you sell products to landlords and property investors and you have national coverage, get in touch!
For info on our SEMINARS click here: Property Seminars, Networking Evenings and Consulting
Our Events only take place twice a year. For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Seminar Event
For ONE TO ONE CONSULTANCY help click here: Private One to One Consulting
For TESTIMONIALS from past customers click here: Testimonials
To BUY THE BOOK click here: Buy the Book at Amazon
For THE HOME PAGE OF THIS BLOG click here: Blog
For THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For GREAT OFFERS on Products and Services for Landlords, click here: Landlords Resources
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!
Copyright of Blog: David Lawrenson 2009.
This blog is updated roughly once a week usually on a Monday or Tuesday.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
Over on the right hand side under all the previous blog entries you will see a button which says “Site Feed.” Copy the link into your News Reader or News Aggregator.
If you have a website & are thinking of reproducing material here, that’s fine but we DO require a link to the blog to be included, including also all the links in this section. (The full article including all links must be available to ALL VIEWERS of your site and not restricted.)
To view posts on related topics select a “Category” at the bottom of this page.
WANT TO ADD A COMMENT?
To add a comment to this post, you just click on “link to this post” then simply add your comment. To view older comments, you’ll need to click “link to this post” and view comments (which will appear at the bottom of the post.)
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.
Labels: buy to let mortgage, buying to let advice, credit crunch, mortgage lenders, Paragon
lettingfocus | | link to this post | 
recent comments