- 27
- May
It has been revealed by Paragon, the UK’s third largest buy-to-let lenders, that it is suffering from the impact of the global credit crunch and may follow in Northern Rocks footsteps by becoming its latest victim.
The company has said that it can no longer borrow the amount of money it needs in order to sustain its business. The company has decided to cut the number of buy-to-let loans it offers by roughly half in the coming year. Other banks are expected to follow a similar lead.
Other buy to let lenders have also had to take urgent measures to raise ready cash including Bradford & Bingley which is the UK’s biggest buy-to-let lender.
If there is a shortage of available home loans in the buy-to-let category buyers will be sucked out of the market. This will further decrease demand for housing amongst buy-to-let investors and send prices dropping further. Ironically, this raises the price of rental property, as fewer properties are available to rent.
The statements by both buy-to-let lenders provides yet further evidence that the global credit crunch will take down more victims in a similar manner to Northern Rock. At the moment many banks simply cannot raise any liquidity because inter-bank lending rates are so high.
As a result of a short supply of liquidity many home loan deals are being withdrawn by banks from the market as well as turning away an increasing number of borrows. Borrowers looking for credit cards, personal loans and mortgages will find it increasingly difficult in the coming months to get their hands on credit.
