According to a Times report, Nigel Terrington, the chief executive of Paragon, challenged assertions made by the government over the danger to the economy posed by buy-to-let lending. He also called for better data to be used as to direct impending policy changes that could choke further growth of the sector.
Paragon told Mortgage Solutions: “Our concern here is that there are a series of policy developments underway that will impact the private rented sector. It seems that these are being progressed without a robust assessment of the impact that these measures will have on the housing market and the increasingly large cohort that chose to rent or need to rent privately. Private landlords may be a popular political target but a one-dimensional housing policy that favours home-owners above renters ignores the reality of the diversity that is required to meet Britain’s housing needs across the spectrum.”
The Treasury launched a consultation on whether to grant buy-to-let lending caps to the Financial Policy Committee (FPC) and the Prudential Regulatory Authority, which supervises financial companies is investigating the underwriting standards in the sector. Both studies conclude in March.
Terrington warned that the conclusions could be based on bias and prejudice rather than on facts. “Nobody loves a landlord. They are an easy target to demonise. However, the numbers are misleading,” he said.
Shares in Paragon have slumped from a high of 455.50 in May 2015 to 329.80 today.
He said a key point in the Bank’s financial stability report last month, that buy-to-let losses have been about twice the level of owner-occupier losses, was flawed. He said the data it used mixed second-charge mortgages, which have a far higher arrears rate, with buy-to-let, skewing the data.
The loss rate severity on second-charge loans can be 100%, said Terrington.
The FPC acknowledged in the record of its September meeting the need to develop better data, but Terrington and others in the buy-to-let market fear that many more key policy decisions will be made before that information is gathered.
The Council of Mortgage Lenders (CML) said at present, arrears on BTL in aggregate are performing better than arrears on owner occupied homes, but proportionately, repossessions are higher.
