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Paragon Bank reports strong specialist buy-to-let lending growth

  • 07/12/2021
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Paragon Bank reports strong specialist buy-to-let lending growth
Paragon Bank increased buy-to-let lending to landlords by 33.9 per cent to £1.61bn in its last financial year, but the onset of Covid-19 in March 2020 had a significant impact on its other lending volumes in the second half-year.


In total, 97 per cent of buy-to-let lending for the year to 30 September 2021 was classed as specialist, reflecting the company’s increased focus on this area of the market.

Richard Rowntree, Paragon Bank director of mortgages, said: “We enjoyed a very strong 2021 thanks to our landlord customers expanding their portfolios to meet record levels of tenant demand. Our buy-to-let completions were up significantly on the previous year, bringing much-needed new housing into the private rented sector.”

However, the group’s second charge mortgage operation was in line with plan in the first half-year, but it was scaled back in the second half in response to Covid-19 alongside the provider’s first charge residential lending.

The report said: “Within the second charge mortgage market the group targets only higher credit quality customers, rather than the lower-rated borrowers generally associated with this sector. This limits potential lending in this field but should provide more resilience in adverse economic conditions, as proved to be the case in the pandemic.”


Arrears and payment holidays

Arrears on the buy-to-let book decreased in the year to 0.15 per cent down from 0.18 per cent in 2019, although some arrears will inevitably have been suppressed by payment holidays, said the report.

Paragon’s arrears on post-2010 lending replicated last year at 0.03 per cent, which is low against the UKFI average arrears figure of 0.52 per cent across the buy-to-let sector at 30 September 2020.

The lender confirmed just over 20 per cent of the group’s buy-to-let customers took payment holidays when offered, less than five per cent remained there at the year end, with further reductions being seen in October and November.

Customer surveys indicated the motivation for taking these holidays was, in many cases, precautionary, to ensure they were well positioned to deal with potential future tenant payment issues, said the lender.

Second charge arrears increased to 0.62 per cent from 0.38 per cent in the year.


The commercial view

The commercial lending side of the business segment saw an 18.3 per cent reduction in new advances against the previous year. Development finance continued to grow, though less strongly than planned, said the report.

The Covid-19 outbreak reduced new business activity from March, both as a result of customer unwillingness to enter into new commitments and, in the leasing business, as a result of the practical difficulties of sourcing and delivering large pieces of equipment, some internationally, in a global lockdown. Customers’ access to other, cheaper funding sources through government sponsored relief schemes also reduced the scope for new business, it said.

As a result of these impacts, new asset finance leasing volumes reduced by 42.5 per cent compared to the comparative period in 2019, to £166.1m.

The results stated: “In line with the approach taken on the mortgage book, extended payment holidays were offered to SME lending customers, but these were taken up by a substantially smaller number than the initial three month reliefs and at the year-end only 2.1 per cent of accounts remained on a payment holiday.

“The long-term impact of Covid-19 on customers is difficult to predict at this stage, particularly given that many may have received short-term relief in the form of CBILS or BBLS loans from their relationship banks, although feedback from the enhanced customer contact programme is encouraging.”



The Paragon Banking Group reported a 61.8 per cent increase in pre-tax profits to £194.2m for the full-year.

Nigel Terrington, chief executive of Paragon said: “We have delivered an outstanding performance in 2021, which is testament to the strength of our operating model, the quality of our customer base and the capability and adaptability of our people.

“Every lending business in the group has this year made excellent progress, and at over £2.6bn, aggregate new lending now comfortably exceeds pre-pandemic levels. These results validate our longstanding strategy to concentrate on specialist lending markets where we can add value for our customers with complex requirements.”

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