Paragon Bank has recently announced significant adjustments to its range of buy-to-let mortgage products, signaling good news for portfolio landlords. These changes involve a reduction in interest rates across several mortgage offerings, particularly focusing on five-year fixed-rate mortgages. This move is designed to make property investment more accessible and financially viable for those involved in the rental market.
Understanding the Rate Cuts
Key Changes in Mortgage Rates
Paragon Bank’s adjustments are centered around its five-year fixed-rate buy-to-let mortgages, which are now offered at more competitive rates. Notably, these mortgages are available for properties up to a 75% loan-to-value (LTV) ratio, meaning landlords can borrow up to 75% of their property’s value.
Impact on Portfolio Landlords
These revised rates are particularly beneficial for portfolio landlords, defined as those owning four or more mortgaged buy-to-let properties. This group can take advantage of the new rates whether they’re applying through limited company structures or in their personal names.
Detailed Look at the Revised Rates
Zero-Fee Five-Year Fixed-Rate Products
For its zero-fee five-year fixed-rate products, Paragon Bank has slashed rates by 20 basis points (bps). The rates now start at 6.10% for single self-contained (SSC) properties with an Energy Performance Certificate (EPC) rating between A-C.
However, this rate slightly increases by 5bps for properties with EPC ratings of D or E. The increase is more pronounced, at 20bps, for houses in multiple occupation (HMO) and multi-unit blocks (MUB).
Options with a 5% Fee
The bank has also reduced rates for its 5% fee five-year fixed mortgage options by 10bps. These start at a rate of 5.15% for ‘green’ products, 5.20% for standard SSC properties, and 5.40% for those purchasing or refinancing HMOs or MUBs.
Loan-to-Value (LTV) and Interest Coverage Ratio (ICR)
Alongside these rate cuts, Paragon Bank has increased the LTV on its nil fee products from 65% to 75%, offering more flexibility to landlords. The Interest Coverage Ratios (ICRs) are calculated at 5.50%.
The Implications for Landlords
Stability and Choice
According to Louisa Sedgwick, Paragon Bank’s Mortgages Commercial Director, these changes are in response to the stabilizing economy. The bank aims to provide landlords with a sense of security and a wider array of choices in their mortgage options.
Benefits of Reduced Rates
For landlords, these reduced rates could mean lower monthly payments, potentially increasing the profitability of their rental properties. The extended LTV also provides more flexibility in financing, especially for those looking to expand their portfolios.