The bank said this decline was partly caused by borrowers’ nervousness about the potential impact of the November 2025 UK budget on their businesses.
Its closing mortgage pipeline at the end of the period, however, was 8.6% higher than the year before at £718.9m.
Over the six-month period, the mortgage loan book increased 2.9% year-on-year to £14.1bn.
Paragon has revised down its 2026 expectations for mortgage lending from a range of between £1.5bn to £1.7bn to the lower end of this scale. Its expectations for commercial lending, however, remain unchanged at £1.2bn to £1.4bn.
In addition to strong levels of retention at product maturity, £293m of new lending in the period, over one third of the total, was to customers with at least one existing account.
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Loan growth was stronger in the commercial lending segment, with total balances increasing 9.2% year-on-year to £2.5bn. New business completions, including net drawings on revolving credit facilities within our structured lending business, were up 13.6% year-on-year at £645m over the period.
‘Volatile’ conditions
Development finance drawings were down 0.8% year-on-year, with the pipeline also down 23.5% at £0.62bn over the period, reflecting wider UK housebuilding trends.
Advances in this business are consequently expected to soften further in the second half of the financial year. In contrast, the six months just ended saw growth in new business in the bank’s motor finance, SME lending and structured lending operations, with positive pipelines rounding off the period.
Meanwhile, statutory profit before tax fell by 5% from £140.1m to £133.2m.
The bank’s net interest margin reduced from 3.13% to 3.08% year-on-year, with further tightening expected in the second half of the year.
Impairment charges were higher than the comparable period in 2025, although reduced by almost 20% from the six months ended 30 September 2025.
These charges continued to be driven by expected losses on the portfolio of development finance loans originated before September 2022.
Nigel Terrington (pictured), chief executive of Paragon, said: “Whilst we are mindful of the volatile external environment, our deep experience, strong capital ratios and ongoing technology improvements, mean that we remain well placed to support our customers, deliver sustainable growth and capitalise on any opportunities that may arise.”
