Buy to Let

Paragon bucks trend in buy-to-let amid share buyback plans

Specialist lender Paragon has reported a strong financial third quarter, with buy-to-let lending driving growth, as it plans a fresh share buy-back.

In a trading update covering 1 October 2016 to date, the group said it had seen growth in each of its main lending products. The group completed £575.7m of new lending in the third quarter, taking the total to £1.44bn for the nine months.

Paragon stated it is still seeing strong flows in terms of applications for its buy-to-let products, in an otherwise subdued UK buy-to-let market following recent changes to tax relief which squeezed landlords’profits.

Demand from complex and professional customers was the main driver of growth: the proportion of these customers in the pipeline has risen to 70 per cent during the quarter, up from 61.8 per cent at the start of the year.

Buy-to-let lending accounted for just under £700m at the end of the quarter, of which 58.5 per cent was for remortgage.

Redemption levels rose on the new BTL portfolio as it continued to mature, taking the annualised redemption rate for 2017 to 20.6 per cent for the new book and 10.9 per cent for the total portfolio.

Almost all (96 per cent) of lending in the quarter took place through Paragon Bank, reflecting its increasingly important role in financing new lending flows, the group said.

The asset finance division saw new business increase to £58.8m in the quarter as target markets, systems and operations developed in line with the group’s strategy.

In its specialist business streams, such as car finance, development finance, second mortgage lending and residential mortgages, completion volumes totalled £58.9m for the quarter, reflecting the expansion planned for these product lines.

Paragon’s residential mortgage initiative continues to run as a pilot lending project while system and distribution testing takes place, it says.

Meanwhile, Idem Capital made no new investments in the quarter but maintains “a strong pipeline of opportunities”, both where it invests alone and where it partners with Paragon Bank, it added.

The group completed a £50m share buy-back in July and plans to extend this by up to another £15m.

Paragon said it will review its capital management plans and make a preliminary announcement on 23 November.

Looking to Paragon Bank, it reported an increase in savings deposit balances to more than £3bn, from over 100,000 customers. 

Paragon said it continues to trade in line with expectations and reiterates its guidance for the year.

Nigel Terrington, Paragon’s chief executive, said: “Our strong capital and funding resources provide the foundations for further growth alongside returning additional sums to shareholders via the enhanced buy-back programme. Our new business streams continue to develop well and the increasingly complex focus in buy-to-let demand is also supporting absolute growth and market share gains for Paragon.  

“The group is well-placed for the next phase of PRA underwriting rule changes, which will provide Paragon with a further competitive advantage”.

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