Heron said that investors’ confidence in securitisation transactions has been slowly building over the last 18 months and this has been critical to Paragon’s return, allowing it to finally put together a sustainable funding agreement.
Heron said: “We wouldn’t have returned to lending unless we had confidence in the structured financial market and it’s a great indicator for the rest of the industry generally.”
He added that the current difficult economic climate must be separated from the seizure of the international money markets in late 2007-2008: “The dysfunction in the international money markets then was something else completely. We have good evidence that the mechanisms of the money markets are starting to work more normally and that allows us adequate confidence to start lending.”
Paragon has arranged funding via a £200m warehouse facility provided by Macquarie Bank. The revolving nature of the facility will allow Paragon to repeatedly use it to pre-fund securitisation deals and offers a sustainable and secure funding platform.
Heron said the structure was the same that Paragon had used to finance mortgages since 1997 and added: “This may well be the first time since the credit crunch that a classic warehouse structure has been re-established for new lending.”
Paragon’s managing director said that in the next year the lender was not focusing on targets for numbers or values of loans and was more intent on working to get a good flow of capital through its intermediary distribution.
Mortgages for Business had already been announced as a member of Paragon’s broker panel and has worked with the lender to design products suited to professional property investors, allowing loans of up to £5m on an individual risk on any number of properties.
Nevertheless, while Paragon is focused on lending to professional landlords, Heron said it was happy to work with amateur landlords as well.
David Whittaker, managing director of Mortgages for Business, said: “The dramatic withdrawal of lenders and products during the credit crunch severely limited the funding options for many portfolio property investors. The majority of lenders that remained in the market preferred to stick with ‘vanilla’ buy-to-let products for novice and small-scale landlords.
“We are particularly pleased to see the focus on facilities for more complex buy-to-let scenarios including Houses in Multiple Occupation, multi-unit blocks and mortgages for Limited Companies.”
David Salusbury, chairman of the National Landlords Association, welcomed Paragon’s return, saying: “Paragon’s new product range is excellent news for the private-rented sector, which has witnessed a dramatic decline in buy-to-let products since 2007.
“It will help stimulate the private-rented sector into playing a bigger role in providing a much-needed alternative to owner-occupation during these difficult times, which will hopefully not be negated by the anticipated cuts to housing benefit deterring investors.”
