Summer Budget 2015 – Landlords Reactions

Very interesting interview with the chief of Paragon yesterday in The Times.

"Public enemy or paragon of virtue? Katherine Griffiths hears the case for an industry’s defence"

"Nigel Terrington has much to thank Margaret Thatcher for. When, as Conservative prime minister, she opened the floodgates to a sell-off of council housing and lifted renting restrictions, she presented a huge opportunity to private landlords and, in turn, to the institutions financing them.

Mrs Thatcher’s move was the cue for Mr Terrington in 1995 to set Paragon’s course towards buy-to-let lending. At the time, “other lenders focused on sub-prime and self-certification loans”, but that was not for him, an executive who had been one of those sorting out the mess of National Home Loans, Paragon’s predecessor.

In the 1980s, it had specialised in sub-prime loans to first-time buyers and had to be bailed out by the Bank of England in 1991. Thus, when he became Paragon’s chief executive 21 years ago, Mr Terrington could see the risk posed by the emerging sub-prime sector: “Given our experience of what we saw that went wrong in the late eighties and early nineties, we steadfastly avoided the higher-risk lending products, concluding that buy-to-let had strong credit credentials and good growth prospects.”

Cue Paragon’s impressive advance as a company — which, perhaps, makes it all the more striking that the 56-year-old is confronted by a very different environment in an era overseen by Mrs Thatcher’s Conservative heirs. On one front, there have been multiple government attacks on buy-to-let, on another warnings from the Bank of England about the sector’s potential threat to the financial system and on a third a push by global regulators for specialist banks to hold more capital. Moreover, being in the market of lending money to landlords puts Paragon at the heart of other issues, such as housing policy, immigration and the demographics of modern living. “Challenges,” Mr Terrington calls them.

“Nobody loves a landlord,” he says, even if Britain is dependent on them. “A quarter of tenants in the private rented sector are part of the social housing requirement of the country, where people receive housing benefit.

“In 1979, 35 per cent of people were in council houses. Now that is 8 per cent. The government has, in effect, privatised social housing to the private rental sector over several decades.”

To much fanfare, the government announced plans late last year to build 400,000 new homes by 2020, claiming that the expansion would provide a key part of the solution to Britain’s housing crisis — but the pledge was completely inadequate, according to Mr Terrington, dwarfed by the housing needs of immigrants alone.

“Britain accepted 600,000 people into the UK in the year to June . . . After five years, almost 80 per cent of immigrants are still in the private rental sector.” You can add to that students, divorced people or those moving for work, as well as those who simply cannot afford a deposit who need to rent.

A fifth of the UK’s housing stock is made up of private rental properties. “Most analysts forecast it will be 25 per cent in the medium term. Nobody is talking about a fall in the level of tenant demand. If the level of landlord growth falls behind the tenant growth, rents will rise faster.”

Those trends are at odds with the Treasury’s warnings that the buy-to-let sector has been growing too quickly, preventing first-time buyers from getting on to the housing ladder. At the same time, the Bank of England has highlighted the possible risk to the financial system from buy-to-let, asserting in December’s Financial Stability Report that the sector’s souring loans have been about twice the level of owner-occupier losses.

Mr Terrington has challenged such assertions, pointing out that the Bank’s numbers include “second-charge” mortgages — loans secured by homeowners against their properties in addition to their main mortgages. Lumping the two together is “fundamentally wrong”, he says, as “the loss severity on second charge mortgages can be materially higher than on first mortgages”.

The Bank’s statistics certainly do not match Paragon’s own. “We have made £3 billion of buy-to-let loans since the financial crisis and only three loans have any arrears,” Mr Terrington says. He has commissioned independent research to provide a better picture on sector-wide buy-to-let data — but it is a race against time, because the Treasury will decide by March whether to grant sweeping new powers to the Bank’s financial policy committee, allowing it to impose loan-to-value caps on the sector. At the same time, a 3 per cent stamp duty surcharge on buy-to-let investments will be introduced from April and the Treasury is also phasing in cuts to the tax relief that property investors have enjoyed.

Prudently, Paragon has been broadening its business in recent years, gaining a banking licence two years ago and rapidly growing lending and deposit-gathering. Having emerged from the financial crisis in better shape than many, Paragon also has been snapping up portfolios of loans cast off by bigger banks. In October it made one of its biggest bets, paying £117 million for Five Arrows, which provides asset finance for areas including construction and engineering. The bank is set to break into profit this year. Paragon will update on its performance this week.

Given the scale of such a challenging environment confronting Paragon, Mr Terrington is nothing if not a reassuring presence. Twenty-one years in the top job do that for you, especially if you can argue that you have confronted greater problems in the past and conquered them. In 2007, Paragon faced a fight for survival as Northern Rock’s collapse sparked a panic about other financial firms. Paragon’s lending banks behaved “appallingly” by refusing to provide a line of credit, but instead of folding, the banker pulled off a £287 million rights issue from shareholders, giving the Solihull-based business a crucial lifeline.

Afterwards, Mr Terrington sent his senior executives a framed copy of the poem If, by Rudyard Kipling, in recognition of them keeping their heads while all around were losing theirs. That seems to be his mode of operating. And it appears to work.

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107,000 sigs in 4 days - sign and share , surely we can find a way of working with these guys ?

https://www.change.org/p/consider-steve-lewis-for-next-chief-executive-of-hmrc-board-peoplestaxman?source_location=trending_petitions_home_page&algorithm=curated_trending

Article from the Mail on Sunday today

http://www.dailymail.co.uk/debate/article-3413987/Is-Osborne-just-Labour-Chancellor-disguise-economist-says-George-hammering-middle-classes-pensions-buy-lets-stamp-duty.html

That is a great article and makes u realise it's not just landlords but middle class strivers across the board

Cameron called us the heroes of society before they got elected now they are taxing the very people who got them in out of existence joke and it will come home to roost for them next time

He definately needs engaging with he may not even know about clause 24

Hi NW. He does know about C24 - he mentions it in the article and is clearly against it. I think he could be a new champion of ours. The Institute of Economic Affairs was against C24 even before it was announced. See this

http://www.iea.org.uk/blog/the-green-interview-%E2%80%93-failed-on-style-what-about-the-substance

Hi ros

Thanks for that he needs to be on board

http://www.theguardian.com/money/2016/jan/24/investors-rushing-to-snap-up-homes-before-buy-to-let-tax-comes-in

The latest on Landlord reactions from the guardian - contrary to ALL (Anarchists, Lunes and Lefties) on HPC who say everyone will be selling up, there are still folk going in to buy 10 off at £50k each for cash. Obviously the uber rich don't feel a crash on its way. I don't either, just an orderly rearrangement of portfolios over the next 5 years, and people making wise decisions in a timely manner, not destabilising the market despite the Osborne/Carney double act.

Is Osborne just a Labour Chancellor in Disguise?

http://www.dailymail.co.uk/debate/article-3413987/Is-Osborne-just-Labour-Chancellor-disguise-economist-says-George-hammering-middle-classes-pensions-buy-lets-stamp-duty.html

As part of something I'm working on, I am looking for someone who is currently a basic rate taxpayer who will become a higher rate taxpayer because of Clause 24. If you fit this category, I wouldn't need a lot of information - I would need to know any salary you receive from other employment, what your total rental income is, what your maintenance etc. comes to and how much interest you pay to mortgage companies each year. If you could add also the number and type of properties you own, and a bit of biographical detail that would also be good - e.g. how many dependents you have, how long you have been a landlord etc. It would also be even better if you could give me your full name. You would have to be therefore willing for this to become public knowledge. This will be a great help with the campaign as it is something I need which I currently haven't got.
If you are in this category or know someone willing who is, can you please post the details here or email them to Mark Alexander for him to forward to me? Thanks.