Paragon Bank’s latest financial results show that buy to let is not in terminal decline, but the industry is going through structural change.
While it is undoubtedly the case that some landlords are leaving the sector, these are in the main those landlords with just one or two properties, passive investors who are not serious about running a lettings business.
Chief Executive Nigel Terrington also suggests that immigration is seriously pushing up demand for rental properties, resulting in higher prices and putting more pressure on the private rented sector (PRS)
Paragon targets what it calls “specialist landlords”, that is, those with four or more properties and those with “complex property types”. Most of these portfolio landlords now operate through limited companies.
Mr Torrington has said:
“While it is clear that the changing economic environment and regulatory landscape has caused some landlords to step away from the PRS, our experience is that this reaction is concentrated amongst nonspecialist landlords with small portfolios, while our more specialist customers remain committed to the sector.”
Mr Torrington also claims there are not enough landlords in the sector to meet the demands of the UK’s population growth, which he puts down to rising immigration.
“The potential is that it gets worse from here because the UK population is expected to grow by another four million people by 2032 and it is largely going to come from immigration. Immigrants tend to come to the UK and will rent rather than buy. So, it puts pressure on the rental market and therefore we need greater levels of landlord formation, rather than keeping it stable,” he says.
As Paragon observes, chief among the positives for the PRS are the population statistics. These bode well for buy to let, but slow take-up of new landlords risks seriously undershooting future tenant demand.
Over the past two decades the United Kingdom's population has seen steady growth, primarily driven by net migration. Historical UK population (2005–2025) was approximately 60.4 million and by mid-2025. Estimates (MacroTrends) place it between 68.2 million and 69.6 million. This represents an increase of about 8 to 9 million people in just 20 years.
Population growth over the next 20 years or so (2025–2046), according to the Office for National Statistics (ONS), is to increase by 4.9 million (7.3%) over the next 10 years, that’s between mid-2022 and mid-2032, and reach approximately 72.5 million, then reaching 76.6 million by mid-2046.
The population growth in the UK is expected to be entirely due to net migration, as the number of births is projected to be like the number of deaths during this same period. The UK's population is also ageing which will put increasing strain on public services, healthcare and pensions but leading to more older tenants in the PRS. In 2022, 19% of the population was aged 65 or over. This proportion is projected to increase to 27% by 2072.
In short, these trends suggest the rental supply crisis will not abate in the foreseeable future, unless there’s some dramatic change in government policy.
Paragon’s target customers are specialist buy to let landlords, active in the PRS. These landlords typically let out four or more properties or operate with more complex property types such as houses in multiple occupation (HMOs).
Most of them own properties through limited company structures and operate their portfolio as a business. These landlords have a strong understanding of their local lettings market and the current letting regulations, says Torrington. They have a high level of personal day-to-day involvement – buy to let is not a passive income for them.
As specialist lenders, Paragon Bank addresses this segment of the PRS, a sector of the market that has been underserved by many of the larger bank mortgage lenders for some years, Torrington claims.
“While it is clear that the changing economic environment and regulatory landscape has caused some landlords to step away from the PRS, our experience is that this reaction is concentrated amongst nonspecialist landlords with small portfolios, while our more specialist customers remain committed to the sector.”
“Our Mortgage Lending division principally provides buy-to-let mortgages secured on UK residential property to specialist landlords. We have been active as a specialist in this market for almost thirty years, which gives us deep data and a detailed understanding of the market through various economic cycles,” he says.
Paragon increased its buy to let lending despite fears that the coming legislative changes would result in a large exodus of landlords.
As the regulatory and statutory landscape develops for the PRS, namely the Renters’ Rights Bill being introduced by the Labour Government, currently before the House of Lords, the fears of a major impact on the buy to let mortgage market have been largely quelled.
Mr Torrington has expressed his concern that “care will be taken” as the Bill completes its final parliamentary stages, “to ensure the measures in the final Act are practical and fully resourced, and that they balance the needs of both tenants and landlords, as well as recognising the important role which responsible landlords play in satisfying the UK’s housing needs, and in the economy more generally.”
Torrington believes that, if properly implemented, the new legislation is unlikely to have a significant impact on Paragon’s business model. Their survey evidence suggests that around two thirds of landlords in the PRS claim to have a good awareness of the content of the Bill, with a significant number considering that it will have a negative impact on their business, and a much larger number is suggesting that it will have a negative impact on the PRS, their data shows.
One key finding is that a majority expressed the view that they would in future be more selective about who they let to. In that respect the coming tenant friendly legislation could disadvantage some tenant groups.
The 2023-2024 English Housing Survey, published by the Department for Levelling Up, Housing and Communities in November 2024, shows that the PRS continues to represent around 19% of English households, as it has consistently done for some time.
Paragon Bank’s statutory profit before tax was up 26.7 per cent for the six months ending 31 March 2025, while Paragon announced that it is to buy back another £50 million worth of shares - its share price is up over 2.70p today at 895p.
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