At 30 September 2003, PML’s loan book stood at £1,934.3 million, up 36.8% from £1,413.9 million at 30 September 2002.
These strong results are underpinned by PML’s success in developing long term relationships with existing borrowers and intermediaries, with the result that a very high proportion of new applications are submitted by existing borrowers, reducing marketing and processing costs while at the same time helping to maintain margin income.
Business performance was particularly strong in the second half of the year, with new application levels continuing at a high level, pushing the pipeline up to record levels by the year end, with the result that the business is well positioned for a strong start to the new financial year.
Credit quality across the PML book continues to be excellent, with numbers of accounts more than 3 months in arrears at 0.15%, consistently below those for owner-occupied properties (0.98% based on latest CML figures). PML maintains strict underwriting criteria and typically requires a minimum 130% rent to mortgage cover. On average for the business written in the course of the year the mortgage payments were approximately twice covered by rents, giving our landlords a substantial cushion to cope with anticipated increases in interest rates.
John Heron, Managing Director of Paragon Mortgages, comments on the results: “Our strong performance in 2003 and record pipeline demonstrate that buy-to-let remains very healthy. There is still strong demand from tenants, especially as house purchase remains beyond the reach of many prospective first time buyers following the steady rises in property values over the past couple of years. Paragon Mortgages’ data shows landlord yields stabilising nationally at around 7.60% - for the investor who has the right approach and the right skills, buy-to-let remains an attractive proposition.”
Prospects
Tenant demand for rented homes remains strong and this is reflected in the strength of the PML business pipeline. Growth is expected to continue driven by long term and well established trends in the housing market. Of particular importance is the structural shortage of housing in the UK, a shortage which is most pronounced in demographic groups with a high propensity to rent: Office of the Deputy Prime Minister projections are for a 3.8 million, or 19%, growth in the number of households in the quarter century to 2021.
Heron commented further:
“ the record low level of first time buyers we have seen this year combined with the contraction of the social rented sector is boosting demand for private rented housing and this looks as though this is a trend that will persist over the long term. This should maintain the strong credit quality of buy-to-let mortgages and new business flows.”
Paragon Group of Companies PLC highlights include:
