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Paragon see virtue in going after bank licence By Simon Thompson |
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Talks between landlord mortgage specialist Paragon and private bank Hampshire Trust mark a shift in business strategy for the buy to let lender.
Paragon is a thriving business anchored in providing property investment loans to professional landlords.
The firm is one of few serving property business sectors like houses in multiple occupation (HMOs), blocks of flats, loans to property companies and large portfolios.
Paragon posted a 22.5% increase in full-year profits last month, taking advantage of financial turmoil at the big banks that has reduced their appetite for buy to let lending.
However, Paragon executives faced their own travails after been caught short in the credit crisis and having to shut the doors on new lending for a couple of years.
Problems raising funding
Paragon has a root problem as a lender – it’s not a bank.
That meant that when banks stopped lending during the credit crunch, Paragon was a major casualty.
The small amount of lending that went on was between deposit taking lenders, because they were increasing their capital assets to support the borrowing.
Paragon could only come back to the market after securing funding from Australia – and raises more funds to lend by securitising the loans.
If the global banks hit the buffers again, Paragon will face the same problem and lending might jolt to a halt again.
Striking a deal with Hampshire Trust changes all that. Paragon gains a banking licence from the move.
The banking licence makes Paragon a deposit taker and moves the operation up a notch to allow borrowing on the money markets from other deposit-taking banks.
High risk investment
Paragon confirms talks but denies a done deal. Shares in the company, which have risen by over 60% since May, were up 1.3% at 243.4 pence on the back of the news.
Paragon’s last annual results showed a record pre-tax profit of £95.5 million, up from £80.8 million 12 months earlier.
The final dividend lifted to 4.5p per share, up from 2.65p last year. Added to an interim payment of 1.5p earlier in 2012, the total was 6p for the year.
However, analysts list Paragon as a risky place for money.
“Paragon is a high risk business that has become effectively if not technically insolvent twice,” said James Hamilton of Numis.
“Paragon is highly leveraged and despite this it generates a low return on equity. The underlying return is now just under 9% which we believe is dramatically below the cost of equity.”
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Landlords warned - prepare for more regulation |
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Landlords in England are being warned that they should prepare for more regulation after the government published a consultation.
The warning comes from Tim Miles who is a partner at law firm Clarke Willmott.
He says that the Government is cons |
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Research reveals that 2017’s rents fell in real terms |
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The rents being paid to landlords in all parts of the UK fell in real terms during 2017, research suggests.
The findings from HomeLet reveal that rents in November rose by 0.7%.
That's the 11th straight month that rent increases have fallen beh |
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Rents for the UK’s rental properties rise by 2.1% |
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The average rent for a buy to let property grew by 2.1% in the year to September, an index has revealed.
The figures from HomeLet show that the average rent now being paid is £927 every month.
For landlords in London, rents rose by 1.9% o |
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Landlords start exiting the buy to let sector |
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One leading firm of letting agents is warning that buy to let investors are beginning to exit the sector.
The warning comes from Belvoir who say that while the numbers of landlords leaving is not huge, there is a trend appearing.
The firm's chi |
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Landlord confidence takes a knock |
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Despite the prospect of high yields and profitability, a survey has revealed the landlord confidence around the UK has fallen.
The findings from BM Solutions looked at all the key indicators for the second quarter of 2017.
They say that the lev |
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Landlords 'don't know what tenants want' |
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Landlords in the private rental sector are out of touch with their tenant’s wants and needs, according to new research.
The findings from an online letting agent revealed that tenants are clear most often about what they want and t |
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