Paragon Issues U.K. Buy-to-Let RMBS

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Paragon Mortgages priced its first U.K. buy-to-let transaction of 2013 to strong investor demand, according to a Deutsche Bank report.

Standard & Poor’s rated the deal, called Paragon 18. The ‘AAA’-rated, class A notes with a weighted average life of 2.95-years priced at 115 basis points over the three month Libor. The ‘AA’-rated, class B notes with a weighted average life of 3.22 years240 basis points over the three month Libor and the ‘A’-rated, 3.22-years, class C notes priced at 240 basis points over the three month Libor. The unrated class D notes were retained by the issuer.

According to Deutsche Bank, the class A printed tighter than secondary buy-to-let comparables and “generated  an upward realignment in secondary buy-to-let markets.

“This not only affirms the strong demand for product, but also the weak supply in placed U.K RMBS this year, which is at just [around] £3 billion versus £17.1 billion in 2012 year to date.”

Macquarie Bank, Llyods TSB and London Branch are the lead arrangers on the deal.

Paragon stopped originating buy-to-let mortgages between 2008 and 2010. The buy-to-let specialist lender launched the last investor-placed U.K. buy-to-let RMBS, Paragon Mortgages 17, in Oct. 2012. 

The latest transaction will be the second transaction from Paragon that S&P has rated since 2007, and Paragon's third securitization since it resumed lending in 2010

“Strong private rental demand could push up U.K. buy-to-let lending, despite greater mortgage availability for first-time buyers in recent months,” said S&P.

The average rent in England and Wales rose 0.7% m/m and 1.3% y/y in August to £743, £1 below the all-time high; 5 of 10 regions saw y/y rent rises, led by London at 5%, according to figures reported by the Mortgage Finance Gazette and LSL Property Services. The number of new lettings increased 9% m/m and 14% y/y.  







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