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In the Spotlight with Richard Doe of Paragon Bank
Loan Talk spoke to Richard Doe, Managing Director at Paragon Bank, to find out what is behind their recent success.
How does your background in the financial services market help your role as MD at Paragon Bank?
The world of finance has a habit of throwing up new challenges and situations daily. Joining Paragon Bank with some solid experience behind me was obviously helpful. Paragon Bank are definitely a new kind of bank, however, with a unique proposition. It’s been a great journey since we launched, and I’m enjoying driving the bank forwards.
You’ve just reported a maiden profit at Paragon Bank. To what do you attribute this success?
Since we launched back in 2014, Paragon Bank has done what the wider group does best. That is, maintaining our customer focus, providing bespoke, detailed underwriting and pursuing a diversification strategy that allows us to respond quickly to opportunities in the market. Delivering a profit so soon after launching has been great, and is a vindication of all our hard work. We still have big plans for the future, however, so are taking nothing for granted.
Paragon revealed a 584% growth in second charge mortgage advances for last year. Will Paragon Personal Finance’s (PPF) growth for 2016 continue at this rate?
Diversification remains at the heart of Paragon’s overall strategy and we are certainly targeting further growth for the coming months and years. Our HY [half year] results reflected the fact that we are a new entrant to the market, and this level of growth will not be typical going forwards. That said, there has been a really positive response to our entering the market, and this has given us a solid base from which to grow this side of the business further.
How is PPF looking to grow its market share post-MCD (Mortgage Credit Directive)?
We will continue to offer competitive products backed up by top-quality service. The MCD changes have in many ways simplified the product, bringing it in line with residential first mortgage lending. As a result we are already seeing interest from a broader range of mortgage intermediaries and networks. Second charge mortgages remain an important part of the advisers toolbox.
Will you be adding any further specialist lending arms under the bank in the future?
Diversification is a strategy that has always worked for the Paragon Group and been at the centre of what we do. The recent acquisition of Five Arrows has added quite a few new strings to our bow, no pun intended, and we are currently developing several product ranges in the asset finance space.
Paragon Bank saw a huge rise in buy-to-let (BTL) completions year-on-year. Do you expect this trend to continue or was it just a response to the Stamp Duty Land Tax (SDLT) deadline?
There is no doubt that much of the recent surge in buy-to-let lending was a direct result of people aiming to beat the stamp duty deadline. We are now seeing this demand level off as people consider the implications of a raft of new policies around buy-to-let introduced in 2015. There’s a lot of data out there [regarding] landlord sentiment, some better than others, so it’s difficult to say with certainty how things will pan out in the short-term. One thing that is certain, however, is that all the data shows that demand for Private Rented Sector (PRS) properties remains incredibly high and this will continue to drive the market, regardless of the less favourable policy environment.
Have you noticed a shift in BTL investors since the new tax changes?
There has certainly been a strong move among landlords towards operating via limited companies. As a result we are now seeing a move away from some of the more traditional buy-to-let investments such as terraced houses and flats, towards more complex properties such as HMOs [Houses in Multiple Occupation] and multi-unit blocks.
Some property experts have stated that the property market is slowing down – do you agree?
There are so many external factors at play at the moment that I think it would be difficult to call. There are signs of weakness in the global economy, a housing market increasingly skewed by the issue of affordability and all the political attention which that brings, and then, of course, there is the EU referendum. There’s no doubt that property prices have been rising for some time, driven by the London market, and RICS [Royal Institution of Chartered Surveyors] recently suggested this might be slowing. The economy is not ‘business as usual’ at the moment, however, and with a summer of sport and referendums around the corner, I wouldn’t want to be drawn into making too many predictions at this point.
How would a possible Brexit affect Paragon Bank?
Too many people have already got themselves into hot water trying to predict how the UK will look after the referendum, so I don’t want to go down that road! Whatever happens, however, our group is built on sound and sustainable underwriting and lending, and we’ve weathered previous events such as the financial crisis well – so I’m confident about the future.
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