Lender collapse is bad sign for housing market, says National Homebuyers

That fact the buy-to-let mortgage lender Paragon Mortgages has seen its shares value fall over the past month is a bad sign for the housing market.

[UKPRwire, Mon Nov 26 2007] According to professor Charles Goodhart from the London School of Economics (LSE), the firm's near collapse displays a weakness in the market.

Paragon, the UK's third largest buy-to-let mortgage lender, has announced that it is close to collapsing and has seen shares fall by almost 50 per cent.

The firm is launching a £280 million rights issue as it seeks alternative funding and professor Goodhart says that this is bad news for the housing market.

"Remember wherever there is a rights issue, particularly when it is thought that the rights issue might be forced by some need to raise extra capital, it is always likely that the shares involved will tumble on that day," he said.

"The stock market does not like the additional rights issue; it's a relatively bad signal. But it's a signal much more about the housing market than the banking system.

"Certainly the Bank of England would not be able to help it in any way," added professor Goodhart.

Julian King of National Homebuyers says, "Like the Council of Mortgage Lenders [CML], our analysts are predicting around 30,000 repossessions by the end of the year. Hundreds of thousands more will find the 'pinch' even more distressing.

"People who are looking to avoid the potentially disasterous financial implications will find selling their house a further problem.

"The necessity to sell quick will increase and the ability to sell quick will decrease in the coming months. Vendors who need a fast property sale will need to look to alternative methods in order to avoid repossession.

"The current credit crisis will affect homeowners for sometime to come".

Mr King is a director of National Homebuyers, the UK's leading fast property purchase firm. The Sussex-based busines guarantees to make an offer to purchase any property in the UK for vendors who need a quick cash house sale.

Hometrack recently revealed that house prices fell by 0.7 per cent between October and November.

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