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Buy-to-let lending falls following introduction of new rules

Paragon Bank witnessed a sharp decline in its buy-to-let lending in the final quarter last year following the introduction of more stringent lending conditions for those making buy-to-let property acquisitions.

The bank agreed mortgages for rental properties worth £185.2m in the final three months of 2016, less than half the £400.9 leant in the first quarter.

Aside from the introduction of tougher stress tests for buy-to-let landlords, the government has clamped down on buy-to-let lending by removing tax breaks on mortgages, scrapped the 10% ‘wear and tear’ tax relief for landlords who rent out furnished homes, and introduced a 3% stamp duty surcharge on second homes in an effort to create what the former chancellor George Osborne described as a “level playing field” between homeowners and investors. 

However, despite the fall in buy-to-let completions in Q4, the lender believes that the market will pick-up significantly as more private rented properties are needed to cater for growing demand from tenants, as reflected by its pipeline of future loans which continues  to grow.

Nigel Terrington, Paragon Group’s chief executive, said: “We have made a strong start to a year that will see the group continue its transition to a lending and operational model that is orientated around Paragon Bank.

“The lending growth we have seen in asset finance is encouraging and reflects the increasing diversification of the group.  Lending across all divisions and the strong growth in the buy-to-let pipeline bodes well for the year as a whole.”

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