Paragon sees sharp rise in profits
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Buy-to-let lender Paragon has announced an 83 per cent increase in profits, from £15.9m to £29.3m, for the six months ended March 31.
Director of mortgages John Heron (pictured) says the firm is continuing to “prepare the business for the resumption of new lending”. He says conditions in the wholesale funding markets continue to improve and the firm is in discussions with a number of parties regarding possible financing arrangements to support new lending.
He says: “We hope to be able to update the market in due course, but as these discussions are still ongoing, we are unable to provide guidance over their timing or outcome.”
Last month, stockbroker Arden Partners predicted that buy-to-let specialist Paragon could be “weeks away” from a return to new lending after improvements in the wholesale market.
The lender says its latest results are due to the strength of its buy-to-let portfolio. Buy-to-let arrears for the lender stood at 1.17 per cent, compared to 1.74 per cent in the first half of last year while new business initiatives delivered £2.4m profits.
Heron says: “The performance of the buy-to-let portfolio continues to be outstanding, with strong customer retention and low arrears levels combining to deliver excellent revenues and profits for the period.
“In addition, the credit quality of Paragon’s loan assets continues to stand out. Arrears across the £8.5bn buy-to-let portfolio, including accounts where a Receiver of Rent has been appointed, stood at 1.17 per cent, which is considerably better than the comparable Council of Mortgage Lenders’ figure of 2.71 per cent for the buy-to-let industry as a whole.
“Meanwhile, redemptions fell again during the period, standing at 2.7 per cent compared to 11.4 per cent for the corresponding period in 2009. The private rented sector is benefiting from exceptional levels of tenant demand, which strengthens the business rationale for holding property.
“There is also little incentive for landlords to move away from their existing lender as the few buy-to-let mortgage deals currently available are unlikely to be as attractive as their existing mortgage rate. This is creating further downward pressure on redemptions.”
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