Paragon Might Resume Mortgage Lending Next Year

In its latest announcement a UK buy to let specialist lender – Paragon – claimed that it plans to resume residential and buy to let mortgage lending in 2010 as its financial results improved and UK money markets started to recover. Let us remind that Paragon exited the British mortgage market in January last year as its securitization collapsed and the lender was left without funds enabling it to introduce competitive mortgage deals. Chief executive of Paragon, Mr. Nigel Terrington, however, highlighted recently that UK wholesale funding markets showed significant improvements in the past months, especially as such huge buy to let lenders as Northern Rock and Bradford & Bingley left the UK market, causing competition to dwindle. Mr. Terrington claimed that the latest market improvements and demand from investors made Paragon management consider return on the UK mortgage market. He added that Paragon hopes to get access to new funding next year. It is worth noting that despite the fact that Paragon’s mortgage completions fell to £25 million, down from £904 million and that its buy to let mortgage book fell 7% to £9.3 billion, lender’s half-year profit report, published last Tuesday showed that Paragon’s profits increased by 1%, reaching £54.3 million to September. Another sign of Paragon’s business advantage is the lender’s number of mortgages 3 or more months in arrears. While the industry’s average amounts to 3.23% for buy to let mortgages (CML estimates), only 1.54% of Paragon’s mortgage accounts are 3 or more months in arrears. Despite the fact that Paragon’s bad debts grew to £65.9 million, up from £62.2 million, the situation started to improve in the 2nd quarter of 2009, as the Bank of England dropped the base rate. In addition, the survey carried out by Paragon among its customers showed that they are satisfied with loan terms and will be able to afford an increase in interest rates, if needed.