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November 22, 2007

Concerns about the future of buy-to-let mortgages

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by Kay Mitchell

Concerns about the future of buy-to-let mortgages

Paragon, the country’s third biggest lender of buy-to-let mortgages has revealed that it has become the latest UK victim of the credit squeeze. The group said it has become impossible to borrow all the money it needs to sustain its business.

Consequently, it is proposing to cut the number of buy-to-let mortgages it offers by half next year with other lenders expecting to follow suit.

A separate announcement earlier this week from Bradford & Bingley sparked concerns about the future of buy-to-let mortgages. The UK’s biggest buy-to-let mortgage lender said it has sold two commercial mortgage loan books.

A lack of this type of home loan will draw buyers out of the property market and, as a result, increase the possibility of price falls in many regions.

The global credit crunch is also threatening UK consumers and the wider economy. The majority of banks are not able to borrow money at reasonable interest rates.

City analysts were shocked by the announcement from Paragon which sent its shares crashing nearly 50% in early trading yesterday.


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