Speaking to this publication, Sedgwick (pictured), Paragon’s managing director of mortgages, said the changes that Paragon was making were “not revolutionary” but key to its “evolution”, so it can be “recognised as a really good, solid partner who wants to support landlords and brokers alike”.
She added that the “biggest challenge” of her role so far was to “change the perception” of Paragon.
“The only way you can do it is to change the reality, and that’s what we’re doing with things like the new originations platform, increase in loan to value, decrease in interest coverage ratio (ICR) calculations, and then also adding a friction-free process for landlords with up to 15 properties.
“All of these great things, it is giving us the opportunity to prove that, actually, we’re a really good partner for brokers and for landlords alike, and we’re making their life so much easier by amending the proposition,” she explained.
Pointing to Sally Wright’s appointment to the firm looking after mortgage clubs and networks, Sedgwick said it “didn’t have those relationships before”, but they gave the lender “wider reach”.
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Sedgwick said the change in its distribution model meant that around a third of its business is from new brokers.
She praised its existing broker relationships, but said that by “widening our net further, it also means that we are available to more landlords”.
“We’ve got a massive number of landlords that we’ve had and worked with us for many years. We’ve had landlords that have been with us for 30 years, and they’re now reaching the end of the natural life as a landlord, and they’re looking to try and retire.
“It may be that they’ve got succession planning, it may be that they don’t have succession planning. But with that in mind, if we’ve got an ageing population within our portfolio, how do we attract more new landlords? How do we make this private rental sector attractive enough for them to want to be part of it?” Sedgwick added.
Changes to its sales team so there are more senior roles means there is more “succession planning”, and this is another key part of the Paragon “evolution”.
Limited company BTL is at ‘crossroads’
Looking at key areas of opportunity, Sedgwick explained that limited company used to be “really specialist” with only a few lenders that operated in the space, but more lenders had entered the space in the last year.
She said: “I think we’ve got a bit of a crossroads in the bog-standard limited company structure, just a specialist purpose vehicle (SPV) that holds properties within that SPV is no longer specialist and pretty mainstream now, because of the change in landscape.
“I think what your specialist world invites is more complex limited company structures, if they’ve got trusts in their incorporation, large houses in multiple occupation (HMOs) and large multi-unit blocks.”
Sedgwick said Paragon operated at both ends of the spectrum, so it was getting landlords buying their own name and using simple limited company structures as well as the more specialist end.
“Instead of saying, ‘we’re just going to become more specialist’, we’ve gone down the route of: ‘We’re going to service a wider group of landlords, because it’s no longer that specialist’,” she added.
EPCs are ‘blunt tool’
On the Energy Performance Certificate (EPC) reform consultation, which is looking at updating EPC metrics, Sedgwick said it “make[s] sense”, adding that EPCs in their current form are a “blunt tool”.
“If we can make them better and fit for purpose, we can actually assess properties based on the sustainability of that property, rather than ticking a number of boxes. That can only be a good thing,” she noted.
However, she said that this coinciding with EPC legislation, which would impose minimum EPCs for the private rented sector, was “not enormously helpful”, as the private rented sector is only around 20% of housing stock in the UK.
She added that the dates that had been set were also “nigh on impossible to meet”, adding that Paragon was urging the government to reconsider “rushed” EPC plans.
Sedgwick said Paragon has brought out a refurb to let proposition, describing it as a “bridge proposition, with us being the exit strategy”, and it would “continue to enhance” it.
Paragon’s switch proposition should connect landlords wanting to buy and sell
Sedgwick said it had a “really strong switch proposition, and that works well for most of our landlords”.
She said: “It’s super easy for both brokers and for landlords. Brokers get paid a really healthy procuration fee, so that works also really well for them, but my great concern is if we’ve got landlords that maybe have got properties that need improving, or want to add to their portfolio, how do we make that easier for them?
“How do we put those landlords together, one that maybe wants to sell that portfolio because they’re retiring and these new landlords that we’re talking about that want to expand their portfolios, and then how do we enable the funding of that?”
She said it was crucial to ensure there was a “great customer journey” and that the “broker was in the loop” in these scenarios.
Paragon’s originations platform ‘takes away a lot of the legwork’
Sedgwick said Paragon’s new originations platform, which was launched to the whole of market in March, “takes away a lot of the legwork that the brokers would have to have undergone to just submit an application to us”.
The platform has around 21 application programming interfaces (APIs) to various sources, including automatic valuation models (AVMs), Companies House and HMRC, to name a few.
“What this does is it gives you either a really quick yes or a really quick no, and we have been criticised in the past having those elongated nos, which is fairly typical for lenders, so we are one amongst many that were criticised for that. This takes away a lot of that noise, and it gives us a real clear indication as to whether or not we’re happy with the landlord,” she said.
Sedgwick continued on to say that it has seen some “really good, clear improvements around our conversion rates”, as well as improvements to its speed to offer and speed to completion.
She added that the speed to market around product updates and other changes within the system were “really quick”.
