Paragon ‘still encouraged by growth opportunities’ in buy to let, says CEO

Nigel Terrington (pictured), chief executive of Paragon, said that the company’s new mortgage lending for the latest half-year had grown by around 19 per cent to £1.02bn.

He said this “stood out” as the start of the six-month prior there was a “heavy level of disruption” with the mini Budget.

Terrington continued that the majority of lending was professional landlord finance, and that area has “seen strong growth”.

“There’s a lot of talk about amateur landlords exiting the sector, especially some more headline-grabbing statements saying that there is an exodus, but what you’re seeing has kind of been a gradual shift over an extended period of time towards the professionalisation of the market where larger-scale landlords are taking more and more of a dominant place, and we would expect that to continue which is good for our business,” he explained.

Terrington said that Paragon was “still encouraged by the growth opportunities”, pointing to its upgraded guidance for full-year mortgage advances of £1.7bn to £1.9bn for 2023. He said that this showed that the firm “expected more from the second half of the year”.

He added that credit performance was good, which he attributed to “strong customer base with low loan to values” and “highly experienced” borrowers.

Terrington continued that the UK economy was “more resilient than people gave it credit for”, pointing to low unemployment levels, even if interest rates and inflation were “higher than people would like”.

“I think we need to kind of have a bit of stability on interest rates. We need to get to the point of inflection on inflation.

“We’ve seen the Consumer Price Index (CPI) starting to come down, I think it will continue to come down, but you also want core inflation, things like food prices starting to fall as well. I think it’s just going to take a little longer than what people want,” he explained.

Technology improvements to underwriting on cards for 2024

Terrington continued that the firm was investing in “technology change across every part of the organisation”.

He said that the firm had applied upgrades to its development finance division last year, and it was halfway through the process for its SME business.

Terrington said that the mortgage business was on next on the agenda, and it had introduced a new portal to allow brokers to submit applications directly to the lender and it had brought out a back-office portal so customers can manage accounts directly.

“The middle is the next big thing, which is the actual underwriting process and that’s a 2024 project that will transform the business. We really want to see significant improvements in speed with which we’re able to deliver offers, streamline the approval process and be able to make the best use of Open Banking,” he explained.

Terrington said that the company was “very keen on making sure that Open Banking can give us access to many pieces of information and can do so in a way that is really efficient”.

“What you don’t want to do is having people running around getting lots of small bits of information for underwriting when you can find you can build a system that automatically does that and does it more efficiently and more effectively,” he added.

Renters’ Reform Bill could impact student lets

Terrington said that with the Renters’ Reform Bill good landlords had nothing to fear, and the only area that could be improved on was around the student market.

He explained: “If you’re a landlord in the student space then you let out your properties for the next academic year by September or the last quarter before the next academic year.

At the moment, the way the regulation is constructed is that current tenants or the current year’s students don’t have to give notice until two months before. The landlord needs certainty that the current tenants are going to vacate at the end of the year, so you need a fixed term rental agreement.”

Terrington said that landlords, while much maligned, provide a “social good” as “not everyone wants to own their own home or can afford to own their own home”.

He added that the mortgage industry had been crucial in improving standards in the private rented sector as within mortgage lenders’ conditions landlords have to maintain their property and if they do not, then it is a breach.

Terrington continued that Paragon had a team of in-house surveyors who “go and inspect every property” and didn’t use Automatic Valuation Models (AVM).