Its aggregate new advances across its mortgage and commercial lending businesses reached £2.06bn, up from £1.98bn in the same period last year.
Mortgage lending rose 1.2% to £1.12bn from £1.11bn a year earlier.
Buy-to-let (BTL) demand remained sensitive to interest rate movements during April and May but recovered in June. The mortgage pipeline stood at £620m at the end of June.
Customer retention in BTL remained strong, with an annualised redemption rate of 8.1%.
Commercial lending delivered stronger growth, with new business increasing 8.2% year-on-year to £940m from £870m. Paragon said demand was subdued in April and May amid geopolitical and economic uncertainty but rebounded strongly in June, leaving a pipeline of £610m at the period end.
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The bank said the faster growth in commercial lending reflected its diversification strategy and highlighted the arrival of two new teams, one focused on broadening SME lending and another developing a bridging finance proposition.
Limited distribution of the bridging product is expected to begin in the first quarter of the new financial year.
Paragon’s credit quality was strong. BTL arrears fell by 10 basis points (bps) to 40bps at the end of June, while development finance arrears continued to decline.
Nigel Terrington, CEO, said: “Paragon’s trading continues to be strong, with exciting new growth opportunities building on the underlying strength of the business.
“Credit performance remains excellent, and we are achieving good margins and operating leverage delivered through the strength of our franchises and our ongoing tight control of costs.
“The disposal of our SFS business completed as expected on 10 July, further enhancing our capital position and materially simplifying our operational model.”
