Mortgage News
Paragon reports strong profits
Paragon has reported an 84.3% increase in pre-tax profits to £29.3m in its half-year results to 31 March 2010 and confirmed it is preparing to resume lending.
The lender said its £8.5bn buy-to-let loan portfolio had performed very strongly with arrears falling and buy-to-let redemption rates at historic lows. Its new business initiatives delivered £2.4 million profits, exceeding expectations.
John Heron, director of mortgages for Paragon, said: “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.
“We continue to prepare the business for the resumption of new lending. Conditions in the wholesale funding markets continue to improve and discussions are progressing with a number of parties to determine whether suitable financing arrangements can be agreed to support new lending.
“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.”
Paragon’s buy-to-let arrears, including where a receiver of rent has been appointed, were down from 1.74% in the first half of 2009 to 1.17%, well below the industry average of 2.71%.
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Redemptions fell to 2.7% for the half year to March 2010 compared to 11.4% for the same period in 2009. Paragon said that “exceptional” levels of tenant demand had strengthened the business rationale for holding property and there was little incentive for landlords to move from their existing lender with few available buy-to-let deals as attractive as their present mortgage rate. This has created further downward pressure on redemptions.
Heron continued: “Demand from buy-to-let investors is robust, but a lack of available mortgage products is inhibiting the market’s growth, as CML’s figures recently demonstrated. There are fewer than 300 buy-to-let products currently available, compared to over 3,500 in August 2007. That has to change if the private rented sector is to continue to meet the needs of the UK’s housing market.”