'We’re seeing a market that has adjusted rather than retreated en masse': Jason Wilde, Paragon

FR: How is today’s buy-to-let market shaped by the challenging mix of economic and regulatory change in recent years?

While it’s difficult to deny that conditions over the last few years have been challenging, we’re seeing a market that has adjusted rather than retreated en masse.

Activity is more considered, but career landlords remain engaged. They’re reassessing how they invest, looking carefully at what opportunities exist and using finance strategically.

This can be seen in the increase in property held in limited companies and the focus on higher yield potential. That can mean HMOs, or acquiring homes that need lower levels of upfront investment, such as properties that need refurbishing or homes in relatively more affordable areas.

FR: A key characteristic of this year’s buy-to-let market is the volume of mortgages reaching maturity. What’s driving this, and how should brokers be thinking about it?

Around £50 billion of buy-to-let mortgages mature this year, with five-year fixes making up the majority after a significant number of landlords opted for five-year loans during the strong market of 2021, when borrowing costs were much lower and activity was boosted by the stamp duty holiday. 

Those deals are now maturing into a very different political and economic environment, where interest rates are higher and affordability calculations are tighter.

Many landlords are refinancing more than one property, often with staggered maturities, which opens up broader conversations about structure and longer-term plans.

FR: How are landlords responding to the higher rate environment in practical terms?

The changeability of the market means that flexibility is a key consideration. 

Some landlords are opting for product switches to manage affordability, particularly where full underwrites are often not necessary. Others are more cautious about locking into long-term fixed rates at a point they see as at, or near, the top of the rate cycle, which helps explain the interest we’re seeing in tracker products without early repayment charges.

FR: With Minimum Energy Efficiency Standards the next significant regulatory change, what role can brokers and lenders play in supporting landlords to improve their properties?

The changes have been mooted for some time now, so EPCs have become part of longer-term planning rather than something landlords only think about when purchasing. 

Landlords are increasingly taking into account future works, and many recognise that investment can help protect capital value and boost appeal for tenants.

Our lending data reveals that approximately 40% of our further advances are taken out to fund property improvement work. Research carried out on our behalf by Pegasus Insight also found that just over six in 10 landlords expect to upgrade their properties to meet the proposed new Minimum Energy Efficiency Standards by October 2030, and almost a quarter of these expect to borrow to fund the work, with some likely to turn to further advances.

This is a key driver behind our work to strengthen our further advance proposition, moving it onto our enhanced origination platform and streamlining the process. 

It’s about using technology to support experienced underwriting teams, so brokers can help landlords move quickly when opportunities or requirements arise.

FR: HMOs and portfolio lending have long been associated with Paragon. Are those areas still seeing demand?

Very much so. HMOs continue to appeal to landlords looking for stronger yields, particularly in areas with sustained and stable rental demand, student postcodes for example. 

Some landlords are proactively increasing returns by converting properties instead of buying readymade HMOs, which requires experience and careful planning.

It’s all about knowing your market. A great example is a landlord who converted a six-bed HMO into a four-bed HMO, resulting in all rooms having ensuites and working-from-home spaces. That led to stronger rent returns because of the tenant demand for higher quality accommodation, which is also suitable for hybrid working.  

We’re also seeing growing use of our multi-property proposition, which reflects how professional landlords actually operate. 

Being able to include multiple properties within a single application, but complete them at different times, is a real advantage. Portfolios rarely line up neatly, whether that’s purchases completing at different stages or remortgages reaching maturity over a number of months, and the ability to stagger completions gives brokers and landlords far more control over cash flow and timing.

FR: What’s next for Paragon?

This year marks the 30th anniversary buy-to-let, and we were one of a small group of lenders to help develop the product alongside ARLA, now Propertymark. So, buy-to-let is in our DNA and while we’re proud of our heritage, we continue to evolve.

Key to this is our diversification into new markets. Our digitisation has made it quicker and easier to write more simple business to support smaller, less experienced landlords to grow their portfolios. 

We’ve also launched a new tailored lending proposition for applications that sit outside standard criteria, whether that’s landlords with no experience, those financing bigger, more complicated properties or looking for higher loan limits.

These are examples of how we’re responding to broker feedback and market shifts to support landlords to invest in increasing and improving private rented sector stock. The complexity of today’s market means lenders need to be innovative with their products and proposition -  something we plan to do.