According to the lender’s latest half-year results, its buy-to-let pipeline was strong, standing at £810m. However, this is down from £1.34bn a year earlier.
Paragon said that its total loan book had grown by around 2.4 per cent.
The firm attributed this to “strong completions and weak application flows” in the post mini Budget period.
It continued that recent application flows were “stronger” and the pipeline was 20 per cent up from this “intra-period” low and were continuing to grow at the end of the period.
Buy-to-let redemptions were pegged at an annualized rate of 10.7 per cent for the first half of this year, which is an increase from 6.9 per cent in the comparable period in 2022.
The lender noted that in Q1, the redemption rate was higher at 13.5 per cent but returned to a “normalised level” of 7.8 per cent in Q2.
Paragon said that customer retention rates were strong with over 70 per cent of maturing fixe drated being retained during the period.
The firm updated its guidance for mortgage lending advances for 2023 to £1.75bn to £1.9bn, which is up from its original guidance of £1.6bn to £1.9bn.
The lender’s underlying profit before tax grew by around 22 per cent year-on-year to £128.9m.
Paragon said that new lending on properties with an EPC rating between A and C came to £457.8m, up from £251.8m in the same period last year. Within that £93.1m were for EPC rated A or B properties, up from £77.9m in the 2022.
The lender added that 93.8 per cent of its mortgage book had EPC ratings and 99.1 per cent were graded E or higher.
Commercial lending falls nearly 10 per cent
Paragon’s total new lending came to £1.59bn in the six months ending 31 March 2023, which is up from £1.49bn in the same period last year.
New commercial lending accounts for £570m, which is around 9.4 per cent down on the same period last year. It said that SME and motor divisions “outperformance” was offset by lower net completions in development finance.
It added that its development finance pipeline was £710m, compared to £860m a year earlier. The lender said that this was expected as it “reflects the national picture on housing development, with developer caution regarding prices, cost inflation and supply chain reliability”.
Renters’ Reform Bill could impact student lending
Paragon said that it had monitored the development of the Renters’ Reform Bill, which was introduced to Parliament in May, and was “largely comfortable with the reforms, which balance the needs of tenants and landlords”.
However, he noted that there were concerns on the impact of the reforms on student lending and how generally the regulation would be applied to landlords.
The bank urged the government to “ensure that the introduction of the new framework is adequately resourced to prevent disruption to both tenants and landlords”.
It continued: “Overall, the group does not believe its business model will be significantly impacted by the new legislation, and feels that its customer base may be better prepared to face these changes than some other parts of the private rented sector (PRS).”
The lender primarily targets specialist landlords in the market who let out four or more properties or have more complex properties.
BTL market ‘strong but with headwinds’
Paragon said that the buy-to-let market was “remaining strong, albeit with significant headwinds in the economic outlook of market participants not yet clearly demonstrated in the quantitative measures”.
Nigel Terrington (pictured), Paragon’s chief executive of said: “We are delighted to deliver another strong financial and operational performance, achieving record interim operating profits, alongside robust growth in our loan book.”
He pointed to growth in new mortgage lending, which he said was due to its focus on professional landlords and the firm continued to see “strong portfolio growth and tenant demand”.
Terrington said that its portfolios were “performing resiliently” despite “the more volatile and disruptive environment”.
He continued: “We are well placed to continue to support our customers and deliver strong returns for our shareholders as we look to capitalise on the opportunities that the environment will inevitably produce.”
