Monday, Nov 27, 2006

Dangerous buy to let lending growth?

Firstrung: Buy to let specialist Paragon increases lending by 82 percent in twelve months

These stunning figures from Paragon quite simply defy belief - lending up 83% in a single year? In the volatile environment that is 'buy to let' some market commentators may describe this performance as out of control. Surely this 'stellar growth' can only have been achieved by taking on even riskier debt and ignoring even the most basic of under-writing criteria?

Posted by converted lurker @ 10:21 AM (459 views)
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8 Comments

1. tyrellcorporation said...

I'm speechless...

Monday, November 27, 2006 12:34PM Report Comment
 

2. paul said...

Erm, I think they need to check their Maths.

From a base of 59,000 loans to 73,000, with an increase of 14,000 loans:

((14 / 59) x 100) = 20% increase in the number of loans, not 83%. It's still a considerable growth rate but lets keep it real.

Still I suspect their customers aren't doing the Maths either.

Monday, November 27, 2006 12:47PM Report Comment
 

3. japanese uncle said...

Management of this Paragon (it this tradename a bad joke?)may well be driven by quarter-to-quarter performance bonus, without regard to the long term welfare of their savers and employees. Personally I will never save my money in this company,

Monday, November 27, 2006 12:48PM Report Comment
 

4. bidin'matime said...

Paul, I think they are saying that lending this year has been up 83% (or is it 82%) on last year. Up from 1.7bn to over 3bn.

And if BTL has been growing steadily for around 10 years, then a 20% increase in the loan base in one year is dramatic.

Anyone who denies that this is a bubble has their head well and truly in the sand.

Monday, November 27, 2006 01:26PM Report Comment
 

5. monty said...

I think you'll find Paragon's maths is quite solid and merely misinterpreted. The 82% refers to the growth in new BTL loans "from 1.7 billion in 2005 and for the first time exceeded 3 billion." The group's annual report states "Buy-to-let loan advances up 82.2% to 3,038.3 million (2005: 1,667.8 million)".

As for their exposure to risk - most of this has been securitized and sold off into the Mortgage Backed Securities market, effectively giving them another pot of money with which to go back to the mortgage market. Rinse and repeat. This process will keep on going so long as the financial markets show an appetite for this kind of instrument. Here's their latest press release to that effect.
http://www.paragon-mortgages.co.uk/mortgagereference.nsf/news/7067864AC2133BC280257213003DFCBC

Monday, November 27, 2006 04:14PM Report Comment
 

6. p. doff said...

This report contradicts nearly30s earlier view that the only people buying now are those who actually want to live in the property. The article also supports what I'm seeing on the ground i.e. a large proportion of my daily workload is BTL valuations. The buyers may indeed be fools, but there is such a herd of them doing it, it is still driving the market, and HPI in this area.

In contrast, we have had a few more repossessions in recently (4 this week, in fact). However, one repo I valued 3 weeks ago has just received an offer - the agent tells me the buyer is another BTL.

Crazy times - people maxed out on debt at one end of the scale, and an ocean of would-be investors just gagging to buy at the other end. The BTLers obviously don't take any notice of the bears on this site, or any other negative media articles, preferring instead to absorb the property porn programmes and advice from their mate in the pub who's just bought his tenth house and has made a killing over the last few years.

There may be a crash sometime - but not today.

I'll let you know when the tide turns!!

Monday, November 27, 2006 10:05PM Report Comment
 

7. bidin'matime said...

Thanks p - good to have your observations on this.

Tuesday, November 28, 2006 01:34PM Report Comment
 

8. glorious sunshine said...

bidin'matime,

Welcome to the real world and it's going to get a lot tougher if your not on board...did I mention board?

Oops I have done it again...

Well East coast girls are hip
I really dig those styles they wear
And the Southern girls with the way they talk
They knock me out when I'm down there

The Mid-West farmer's daughters really make you feel alright
And the Northern girls with the way they kiss
They keep their boyfriends warm at night

I wish they all could be California
I wish they all could be California
I wish they all could be California girls

The West coast has the sunshine
And the girls all get so tanned
I dig a french bikini on Hawaii island
Dolls by a palm tree in the sand

I been all around this great big world
And I seen all kinds of girls
Yeah, but I couldn't wait to get back in the states
Back to the cutest girls in the world

I wish they all could be California
I wish they all could be California
I wish they all could be California girls

I wish they all could be California
(Girls, girls, girls yeah I dig the)
I wish they all could be California
(Girls, girls, girls yeah I dig the)
I wish they all could be California
(Girls, girls, girls yeah I dig the)
I wish they all could be California
(Girls, girls, girls yeah I dig the)


All fully financed by private tenants I am pleased to say :-)

Tuesday, November 28, 2006 10:09PM Report Comment
 

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