The boss of Solihull buy-to-let lender Paragon is optimistic it could be lending £1 billion to landlords within two years – and is set to increase its headcount in the region accordingly.
The firm, which employs 600 staff, was forced to retrench from new lending when the credit crunch hit, but a new agreement with Macquarie Bank means it can now make a return to buy-to-let mortgages.
The £200 million loan facility will enable it to take advantage of the current strong levels of demand for rental properties.
A growing student population and a rise in immigration, combined with the barriers faced by first-time buyers in getting mortgages, mean demand for rental properties is on the increase.
Paragon Group of Companies chief executive Nigel Terrington said the new facility was the first step in the firm’s ambitious plans to expand its buy-to-let lending again.
“This is just the beginning,” he said.
“We’ve already increased our headcount by 10 per cent over the last year and we would expect to have further recruitment as the business expands.
“The rate that will be will depend on how quickly we can build this new lending business, but we are certainly optimistic for the employment level effects as a result of this.”
Mr Terrington said the initial £200 million facility could translate into a much larger figure available for lending on the ground through the use of securitisiation – packaging up and selling on the mortgages to investors.
“The number of people that we need to employ at the moment is scaled to the £200-£500 million level, but that’s not our plan,” he said.
“Our plan would see us writing £1 billion by 2012 and we would have to recruit in order to do that.”
Paragon was the first UK firm to use securitisation in 1987 and has since carried out more transactions by number than any other financial institution in the UK.
Mr Terrington said those suspicious of its return to securitisation were wrong to lump Paragon, which is very selective about the landlords it lends to, together with the kinds of practices seen with subprime mortgages prior to the credit crunch.
“In the UK, the vast majority, including our own, were high-quality mortgages with very standard, some might say boring, structures,” he said. “If you look at the UK, 96 per cent of all UK mortgage-backed securities have performed in accordance with the way the rating agencies said they would.
“It’s about the quality of the loans and the structure. It’s the US subprime mortgages that were the problem.
“The problem is that people have perceived that that’s what securitisation is like for everyone, in reality it’s not.”
Mr Terrington said Paragon’s return to new lending was something of a milestone for the buy-to-let market, but acknowledged the wider housing market still had a long way to go towards recovery.
“It will breathe some new life into the private rented sector but I think probably it needs a bit more than just us for the whole of the UK mortgage market,” he said.