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Paragon’s BTL lending plummets but bank maintains positive outlook

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  • 27/01/2017
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Paragon’s BTL lending plummets but bank maintains positive outlook
Lending at specialist buy-to-let provider Paragon Mortgages more than halved in the first quarter of 2017, dropping from £401m to £185m a year later.

The group’s quarterly trading update, which is based on business performance from 1 October 2016 to date, showed that buy-to-let lending did pick up in the first quarter compared with three months earlier when £171m worth of deals were completed.

Overall, buy-to-let lending made up 49% of Paragon’s total originations and investments, down from 67% in the fourth quarter and 87% a year earlier.

Paragon said it was “still too early” to determine the impact of the Prudential Regulation Authority’s underwriting rules which will be rolled out further from 30 September, but noted its strong pipeline positioned it well to achieve new business volumes.

Paragon took steps to deal with the first set of rules, effective from 1 January this year, in January 2016 by tightening criteria such as rental coverage requirements.

Last year, Paragon announced plans to diversify its lending strategy by entering the residential mortgage market. The proposition is currently in its soft-launch phase, with a broader distribution planned over the coming months.

Nigel Terrington, the Group’s chief executive, said: “We have made a strong start to a year that will see the Group continue its transition to a lending and operational model that is orientated around Paragon Bank. The lending growth we have seen in asset finance is encouraging and reflects the increasing diversification of the Group. Lending across all divisions and the strong growth in the buy-to-let pipeline bodes well for the year as a whole.”

Underlying profit at the Paragon Group reached £33.1m in the first quarter, in line with management’s expectations.

Second charge mortgage lending at the bank grew both yearly and quarterly to £14m, up from £11m in Q1 of 2016 and £10m in the final quarter.

Since launching at the end of 2015, Paragon’s development finance lending has grown from £6m in the final quarter of 2016 to £10m in the following period.

Retail deposits at Paragon Bank have also continued to grow, reaching £2bn during the quarter from £1.05bn in December 2015.

The lender made its first drawing under the Bank of England’s new Term Funding Scheme immediately after the period end, which Paragon said would “support further lending growth”. It expects additional drawings over the rest of the year.

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