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Paragon sees strong start to the year amid rise in buy-to-let lending

Buy-to-let lender Paragon sees strong start to the year as landlords and SMEs take on more loans

  • Total new lending for the last quarter of 2021 increased by 36% to £708m 
  • Buy-to-let mortgages and commercial lending both rose 37%
  • Buy-to-let mortgage book bulked up to £1.03bn, up 6.2% from a yea ago 

Specialist lender Paragon hailed a ‘strong’ start to its new financial year after seeing a surge in lending, driven by a big jump in demand for buy-to-let mortgages.

Total new lending for the last quarter of 2021 increased by 36 per cent to £708million compared to the same period in 2020, its trading update shows.

Of this, more than half was made up by buy-to-let mortgages, which rose 37 per cent to £408.5million. 

In demand: Paragon saw a big rise in buy-to-let mortgage lending at the end of last year

The latest surge means its buy-to-let mortgage book bulked up to £1.03billion, up 6.2 per cent from the same period a year earlier. 

It comes as private rents in the UK are rising at the fastest rate on record, with the average rent outside London almost 10 per cent higher than a year ago.

Figures released by Rightmove yesterday also showed that London rents have hit a new record and are higher now than before the start of the pandemic after a bounceback in demand fuelled by the return to the office and of overseas students. 

The average rental yield – or the value of rent a landlord can expect to receive from their property in a year – is at its highest point since 2016 in Great Britain at 5.5 per cent, with the North East and Wales seeing record yields.    

Paragon, which also lends to small and medium businesses, said new commercial lending increased by more than 37 per cent to £299million.

The challenger bank said performance had been in line with its expectations. 

‘The momentum that underpinned the delivery of our 2021 results has been maintained through the first quarter of our new financial year, with strong new business flows, improving margins and capital strength generated from our focus on specialist customers and markets,’ said chief executive Nigel Terrington.  

On the savings side, deposits by its customers increased further to £9.6billion in the period.

And despite a hike in the base rate in December, the average interest paid by Paragon to savers at the end of 2021 was lower than at the end of 2020 – 0.9 per cent, compared to 1.2 per cent.  

Paragon shares were little changed at 575p in morning trading on Friday.