In the Spotlight with Holly Morrison, Paragon Bank

FR: Can you start by telling giving us a bit of background on you and your role?

I’m the regional sales manager for Paragon Bank, a specialist buy-to-let lender, and I cover the whole of Scotland.

I’ve been in the role for a little over four years now. I previously worked for the Scottish Building Society who are predominately a residential lender, so while some aspects of the job were similar, it was a big change going from resi to buy-to-let.

FR: And can you tell us the purpose of your role, the people you work with and how your role supports them.

The primary focus of my role is to help brokers and mortgage advisers place business with the bank.

A large part of my role is working as a conduit between the broker and our underwriting team, I always like to do what I can to ensure the deal fits our lending guidelines. Our access to underwriters really helps to smooth the broker’s journey and we often see our underwriters picking up the phone to discuss cases, providing an extra element of support that is quite unique.

FR: Although only recently enacted, it’s now been over a month since the Scottish Government announced plans to place a freeze on rents in private and social rented sector properties. How has this impacted the market – what has the response been from landlords and industry partners like brokers?

Following the initial announcement by the First Minister on 6th September I think a significant proportion of landlords in Scotland were left in shock.

As is often the case with policy announcements, and even more so with the emergency legislation status of the measures, it was lacking in detail so led to a lot of questions that were left unanswered. This further compounded the feeling of concern amongst landlords. We have since heard how the legislation will be implemented but there is still a lack of clarity on some matters.

Some felt that replacing assured tenancy agreements with the Private Residential Tenancy (PRT) back in 2017 swung the balance of power into tenants’ favour.

For example, rent increases were limited to one every 12 months with tenants able to challenge if they felt it was unfair. In addition, the notice that a landlord would need to give to evict a tenant increased to three months in most cases.

This is relevant because although the emergency legislation rightly aims to help those tenants who may have faced difficulty over what looks set to be a challenging winter period, it is felt that many would have been protected by the PRT.

It is interesting to see Westminster clarify their position on ‘no fault eviction bans’ recently but there doesn’t seem to be any discussion on rent caps south of the border.

FR: And what do you think the long-term impact be?

Landlords have recently seen some emergency controls being implemented during the pandemic but along with these controls there was also support via government sanctioned ‘mortgage payment holidays’. On this occasion there doesn’t seem to be much in the way of help for landlords, in the short term at least.

We also need to remember that on top of this, it is likely that landlords will be required to undertake costly energy saving upgrades to their properties in the next few years.

All of this considered, we could see some landlords exiting the market, although I’m unsure if they can sell their rental property if there is an eviction ban. They could potentially sell as a going concern, but I’m not sure if there would be many landlords willing to take this on at this time.

FR: Mortgages recently made front page news after the biggest single day product withdrawal on record. Has this led to any changes in the type of business you’re seeing – are borrowers looking to fix their rates more and over longer terms, are people willing to pay ERCs to get out of their current deal and lock in a better one?

We have been hearing of a willingness from borrowers to pay ERCs to exit from their current deal and secure a new one before prices rise. A lot of this is likely to be a reactive response to some shocking headlines.

I think the biggest change we may see is a shift away from fixed rates. With rates staying fairly consistently low over the past decade or so, fixed rates offered peace of mind but with prices having dramatically increased there may now be more demand for discounts and trackers which can potentially be more cost effective. This is where I believe advice from a qualified professional should be sought and broker services will be more valuable than ever during this unsettled period.

FR: And what of brokers, we know that some have been frustrated after products were pulled with little or no notice so what was the impact on them?

I certainly empathise with brokers and borrowers at this time. I think a lot of us within the industry have grown used to the relatively stable interest rate environment experienced since the Global Financial Crisis so the pace at which the market has moved over the past couple of months has posed a real challenge.

I think the impact has been one of uncertainty because while it seems as though things are settling down a little, we are yet to see how things like the Autumn Statement and cost-of-living crisis will influence markets. I get the feeling that borrowers will ‘wait and see’ how things pan out over the rest of the year.

FR: And how did you deal with this?

We understand the impact of product changes on brokers and their clients, so we try our best to give as much notice as possible. However, we have to be conscious of our service levels and our market exposure.

To help strike a balance, we’ve recently changed our internal processes to allow us to focus on the most important queues. This has been working really well and although we’ve experienced very high application levels over the past few months, our teams have managed to keep delays to a minimum and have worked exceptionally hard.

FR: More broadly, can you please provide an update on the current buy-to-let mortgage market?

It’s obviously a testing time for business owners and landlords are no exception. Encouragingly, tenant demand has been high since the pandemic and looks like it will stay that way for some time.

While some landlords may take advantage of the high property prices and exit the sector, I feel it is likely that the professional contingent will be aware that people will always need flexible housing so will hold fast.

While we may see a downturn in purchases until more stable economic conditions return, we know that many loans are coming to the end of their term so the high demand for remortgages and product switches we’ve seen this year should continue. Paragon have recently changed their switch period to allow borrowers to lock in another deal six months before the end of their current mortgage so this hopefully provides some peace of mind to our customers.