West Midlands-based lender Paragon has announced plans to re-enter the buy-to-let mortgage market after securing a £200 million funding facility.
The group, which employs 600 people in Solihull, will start writing new loans immediately and hopes to return to its previous position of having a 10 per cent market share.
It believes it is the first independent, non-deposit taking lender to come back to the market since the credit crunch struck.
Paragon withdrew from the market in February 2008, but its return has been made possible by a £200 million debt facility provided by Macquarie Bank.
Nigel Terrington, chief executive of Paragon, said: “Competition in the mortgage market has been sorely lacking, particularly as specialist lenders have largely been unable to secure funding or Government support to enable them to compete against high street lenders.
“Nowhere is this more evident than in the private rented sector where tenant demand is strong and expected to grow.
“This is an increasingly important part of the UK housing market and competition is vital for a healthy and vibrant buy-to-let market and we aim to provide that competition.”
The so-called warehouse facility gives Paragon the money it needs to write new loans up-front, until it has a large “bundle” of mortgages, which it will then securitise, raising fresh funds to lend.
It hopes the new facility will help enable it to write around £1 billion of new mortgages a year in the future.
The group said demand for rental property is as strong as it has ever been, as potential first-time buyers are forced to delay getting on the housing ladder, while the country also has a large student and immigrant population looking to rent.
It plans to focus on lending to professional landlords who have large portfolios of properties.
The news that the group is returning to the mortgage market provides a significant boost for the buy-to-let sector, which has been decimated by the credit crunch.
The number of different buy-to-let products available has dived from more than 3,600 in July 2007 to less than 280, while the market is dominated by two lenders.
A total of £2.4 billion was advanced to buy-to-let landlords during the second quarter of the year, well down on the £12.4 billion during the height of house price boom.
Paragon’s announcement comes days after Lloyds Banking Group, the buy-to-let market leader, announced it was slashing the maximum amount it would lend to landlords to £2 million secured on no more than three properties, down from £3 million secured on up to nine properties.