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22 December 2010

Solid outlook for buy-to-let lending

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by Gill Montia

Solid outlook for buy-to-let lending

In its outlook for 2011, Paragon is predicting that landlord finance will be more readily available as the year progresses.

The buy-to-let mortgage specialist is expecting gross lending to finish the year between 10% and 15% above 2010 levels, as the number of lenders and products increase.

According to the firm’s chief executive, Nigel Terrington, strong tenant demand will continue, with the Government’s planned changes to social housing helping to stimulate growth in the UK’s buy-to-let market.

Strong opportunities should also exist for commercial brokers to meet the more complex needs of buy-to-let borrowers, especially for Houses in Multiple Occupation, where Paragon sees a growing market.

Mr Terrington adds: “Landlords should profit from lower void periods and strengthening yields, given rising rental levels and a flat housing market.”

However, he warns that landlords must be cautious of tenant unemployment and arrears.

The chief executive is also concerned that new lenders could focus on smaller-scale landlords at the expense of the professional variety, and notes that some lenders are testing affordability on a short-term product rate, which could be dangerous when interest rates start to rise.

Mr Terrington sums up: “Risk and affordability is not the same thing and the industry must be conscious of this as it underwrites new business”.

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