Lending to new customers reduced by Paragon
September 29, 2008
Specialist buy to let mortgage provider, Paragon, has announced that it will be reducing its lending levels to new customers as of the end of February 2008, reflecting the cutbacks that many lenders are making. Both businesses and private consumers are likely to find it increasingly difficult to get finance in the coming months, as lenders tighten their belts and increase stringency when it comes to offering finance.
The commercial division of the Nationwide recently announced that it would not be offering loans to new commercial borrowers or taking broker referrals, instead choosing to concentrate on existing borrowers. An official from the building society stated: “I am using market conditions to be very selective about the type of lending we do. There is an enormous appetite out there for borrowing, half of my competitors have disappeared and a lot of people are looking for finance.”
Paragon has now stated that difficulties in getting funding from the wholesale money markets has resulted in no choice but to cut lending levels to new customers, at least until conditions in the money markets improve. Officials from the firm have made assurances that the service levels to existing customers will not be affected.
One official from the firm also stated that Paragon was hopeful that “the rights issue will provide Paragon with a platform from which it can pursue further funding, so the company can return to writing significant volumes of profitable business when credit markets reopen”.
In the meantime a number of lenders have confirmed that they will be cutting back on lending over the first three months of this year, which will make finances increasingly difficult for consumers and businesses and will inevitably have an effect on the economy, which is already experiencing a downturn.
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