Highlights include:
- Pre-tax profits of 29.3 million (2009 H1: 15.9 million)
- Buy-to-let arrears, at 1.17% (2009 H1: 1.74%), falling materially and significantly below industry averages
- Buy-to-let redemption rate at historic lows
- New business initiatives deliver 2.4 million profits and exceed expectations
- 9.1 billion portfolio match-funded to maturity
John Heron, director of mortgages, says:
"The performance of the buy-to-let portfolio continues to be outstanding, with strong customer retention and low arrears levels combining to deliver excellent revenues and profits for the period.
"In addition, the credit quality of Paragon's loan assets continues to stand out. Arrears across the 8.5 billion buy-to-let portfolio, including accounts where a Receiver of Rent has been appointed, stood at 1.17%, which is considerably better than the comparable Council of Mortgage Lenders' figure of 2.71% for the buy-to-let industry as a whole.
"Meanwhile, redemptions fell again during the period, standing at 2.7% compared to 11.4% for the corresponding period in 2009. The private rented sector is benefiting from exceptional levels of tenant demand, which strengthens the business rationale for holding property.
"There is also little incentive for landlords to move away from their existing lender as the few buy-to-let mortgage deals currently available are unlikely to be as attractive as their existing mortgage rate. This is creating further downward pressure on redemptions."
On Paragon's plans for new lending, Heron adds:
"We continue to prepare the business for the resumption of new lending. Conditions in the wholesale funding markets continue to improve and discussions are progressing with a number of parties to determine whether suitable financing arrangements can be agreed to support new lending.
"We hope to be able to update the market in due course, but as these discussions are still ongoing, we are unable to provide guidance over their timing or outcome.
"Demand from buy-to-let investors is robust, but a lack of available mortgage products is inhibiting the market's growth, as Council of Mortgage Lenders' figures recently demonstrated. There are fewer than 300 buy-to-let products currently available, compared to over 3,500 in August 2007. That has to change if the private rented sector is to continue to meet the needs of the UK's housing market.
"Paragon is on a solid financial footing, with our assets match-funded to maturity and strong operational cash flow. We have successfully steered the Group through a period of very difficult market conditions and are in a strong position to take advantage of any market opportunities that present themselves."
