22-11-2007
New fears over buy-to-let "meltdown"
News by Adfero for Simply Business - independent providers of business insurance, business finance, landlord insurance, buy-to-let mortgages & commercial mortgages.
New doubts over the future of the UK's buy-to-let market have been expressed following the emergence of difficulties at another mortgage lender.
In a situation likened to the recent crisis at Northern Rock, it is feared that mortgage lender Paragon could fail, should it prove unable to repay loans totalling £280 million before repayment is required at the end of February 2008. Paragon specialises in the provision of mortgages to property investors.
"It's not surprising that lenders who need to obtain finance to support a mortgage book are going to have problems," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors. "But that shouldn't be seen as a negative for the whole buy-to-let market," he added.
In response to the potential crisis the mortgage lender has suggested the implementation of a stand-by rights issue, in an effort to raise funds. Although such a move would require the consent of shareholders, it would be underwritten by financial services firm UBS.